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BRAZIL TO HELP DEVELOP OIL, GAS IN ARGENTINA'S NORTHEAST BASIN

Sept. 28, 1992

Brazil and Argentina have agreed to joint exploration and development of oil and gas in Argentina's Northeast basin. Although not covered by the accord, the venture could lead to a 2,400 km, $2.5 billion gas pipeline system from the Argentine basin to southern Brazil, beyond almost $2 billion in exploration and development costs. The Northeast basin has proved reserves of 95 million bbl of crude oil and 2.1 tcf of gas.

Brazil and Argentina have agreed to joint exploration and development of oil and gas in Argentina's Northeast basin.

Although not covered by the accord, the venture could lead to a 2,400 km, $2.5 billion gas pipeline system from the Argentine basin to southern Brazil, beyond almost $2 billion in exploration and development costs. The Northeast basin has proved reserves of 95 million bbl of crude oil and 2.1 tcf of gas.

AGREEMENT DETAILS

Under Argentina's privatization program, half of the basin's reserves will be privatized through public tenders beginning in October, with Argentina's state oil company Yacimentos Petroliferos Fiscales retaining 45%. Under a letter of intent with YPF, Braspetro, the foreign upstream arm of Brazil's state oil company Petroleos Brasileiro SA, will acquire one third of YPF's share. Costs of that participation won't be known until after the public tender.

Petrobras and Braspetro also would commit to further exploration in the basin, in Salta Province near the Bolivian border. YPF's Jose Estenssoro said the Northeast basin can produce 1.06 bcfd for 25 years for export to Brazil.

To support such a project, outlays of $1.9 billion would be needed for drilling and production facilities during 1994-2000, construction of a trunk line from Campo Duran to Sao Paulo at a cost of $2.1 billion through 1998, and, in the long term, construction of a regional gas grid.

ADVANTAGES

Without the option of exporting the gas to Brazil, Petrobras said, the alternative market for Argentina would be the less economic option of exporting liquefied natural gas to Japan.

Brazil is trying to expand the natural gas share of its energy mix to 10% by 2000 from the current 2%. It signed an agreement last month to import 280 MMcfd of gas from Bolivia beginning in 1995 (OGJ, Sept. 14, Newsletter). Brazil ultimately wants an integrated gas grid in its southern provinces fed by gas from Argentina, Bolivia, and its Santos and Campos basins. At the same time, Brazil wants to step up trade with Argentina in an effort to further the establishment of Mercosul, a common market of Brazil, Argentina, Uruguay, and Paraguay.