Argentina cuts local energy supply, bans exports

Jan. 14, 2008
Argentina's President Cristina Fernandez de Kirchner has blamed global warming for current energy cuts and export controls her government is imposing following a heat wave last week.

Eric Watkins
Senior Correspondent

LOS ANGELES, Jan. 14 -- Argentina's President Cristina Fernandez de Kirchner has blamed global warming for current energy cuts and export controls her government is imposing following a heat wave last week.

"These major changes in temperature haven't come out of nowhere, they have a direct link to the environment" said Fernandez, whose husband, former President Nestor Kirchner, has been blamed by critics for his failure to address the problem of supply.

During his time in office, Kirchner repeatedly criticized oil and gas companies such as Repsol-YFP SA and Petroleo Brasileiro SA (Petrobras) for not investing enough, while the companies called for the government to raise domestic prices in order to create a better climate for investment.

President Fernandez said there were more that 50,000 simultaneous power cuts on Jan. 8 after demand peaked. She said electricity supply had been disrupted to almost 6% of the grid as a result of the high temperatures, with some 1.2 million people affected—some 300,000 in Buenos Aires alone.

To reverse the situation, GE Energy in December said it would supply 20 natural gas-fueled Jenbacher generator sets for a new 30 Mw power plant being built to support the regional grid as well as oil and gas field production requirements in southwestern Argentina as the country seeks to overcome its energy shortages.

Industrial equipment provider Industrias Juan F. Secco SA of Santa Fe, Argentina, ordered 20 of GE's JGS 420 GS-N.L Jenbacher gen-sets, which will be installed at the expanded El Huemul power plant owned by Occidental Corp., and at new power plants being built.

The El Huemul plant uses field gas with a high carbon dioxide content, which is consumed by the power plant without treatment. The equipment is scheduled to be delivered to the site by February, with installation and commissioning set for later in the first quarter.

Last week's power cuts coincided with an Argentinean government decision, in the wake of rising domestic prices, to suspend all exports of liquid fuels, including oil, gasoline, diesel, fuel oil, and naphtha.

Trade Secretary Guillermo Moreno also ordered that state-regulated prices return to levels in place on Oct. 31, 2007, a decision based on the so-called Supply Law passed in 1974 that requires suppliers of energy and other products to first meet domestic demand before exporting.

The Argentinean government will lift the ban once oil companies bring down gas oil and petrol prices to the Oct. 31 levels. Until then, the situation in the country will be monitored by the Argentine Trade Secretariat.

Raul Castellano, vice-president of Argentine hydrocarbons confederation CECHA, said it was an extreme move to cut all exports, but it should help to normalize prices on the domestic market, and that is absolutely necessary.

"The biggest problem in Argentina is not price but supply," Castellano noted.

While Argentineans may welcome the move, neighboring countries already are expressing concerns over their own potential supply problems resulting from Argentina's ban.

More than 50% of the fuels consumed in Paraguay are imported from Argentina, and the Argentinian ban might create serious problems for Paraguay, according to Blas Zapag, the head of Paraguayan company Copetrol.

Didier Olmedo, director general of economic policy of Paraguay's Ministry of Foreign Affairs, said Jan. 8 his country is concerned about the export ban decision to avoid shortages.

Olmedo assembled an emergency meeting with representatives of the Paraguayan Industry and Commerce Ministry and local fuels producers and distributors to discuss how to avoid a fuels shortage in the Paraguayan market.

Paraguay will officially report its concerns to the Argentine authorities via diplomatic channels, he said.

Contact Eric Watkins at [email protected].