Argentina to Launch New Program to Boost Gas Exploration

BUENOS AIRES (Dow Jones), Nov. 16, 2009

The Argentine government will soon announce a new program aimed at giving companies more incentive to explore and produce natural gas.

The program will build on a previous incentive plan known as "gas plus," which allows companies to sell natural gas at higher-than-normal rates.

The new program, reported earlier Monday by El Cronista newspaper and later confirmed by the Planning Ministry, would allow gas companies to sell excess supplies at above market prices.

Cronista reported that the Energy Secretariat expects the new plan to attract investment totaling about $900 million, though the Planning Ministry couldn't confirm this.

Apache Corp. recently received approval to sell natural gas at higher-than-normal rates under the Argentine government's "gas plus" program. It was the company's second approval so far this year and Apache has several approval requests in the pipeline.

Under the plan, Apache will start selling 10 million cubic feet per day of natural gas to Cammessa, Argentina's wholesale power-market regulator.

Starting in January, Apache will sell the gas for $4.10 per million British thermal units for one year. The gas will come from the Guanaco and Ranquil-Co fields in Neuquen province.

Earlier, Apache was approved to sell 50 million cubic feet per day of gas from two fields in the provinces of Neuquen and Rio Negro. That gas will sell for $5 per million BTU beginning in 2011.

That's about double what Apache and other companies have been getting per million BTU for other projects. Some gas producers have been receiving an average of $2 a million BTU, far below the average market price in many countries.

That's also far below the roughly $6 Argentina pays to import natural gas from Bolivia or what it pays to import liquefied natural gas from Trinidad and Tobago.

Argentina's gas industry has long faced unfriendly prices and unpredictable tax policies that discourage investment. Since Argentina devalued its currency in early 2002 and froze utility rates, companies here have voiced concern about severely reduced returns on their investments.  

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