Argentina Suspends Auction for Offshore Blocks

BUENOS AIRES (Dow Jones Newswires), Aug. 9, 2011

Adverse market conditions have led Argentina's state-run energy company Enarsa to suspend plans to auction oil exploration rights at 32 offshore blocks.

"The international context is not very good. It's not a good time to be doing this," a person familiar with Enarsa's plans said Monday. He added that the company remains interested in exploring those areas.

Enarsa planned to begin auctioning the blocks this week to foment offshore oil and gas exploration.

Enarsa will continue evaluating the market and will resume the auction process once conditions are more favorable, the person said.

The blocks are located in the Atlantic Ocean near Argentina's Patagonia and include areas such as the Valdes Peninsula, San Jorge, and Malvinas, among others.

It's unclear how much interest exists in the blocks, though Enarsa already has signed agreements with Petrobras Argentina and YPF to look for and develop resources in the region.

Argentina has been struggling to find new sources of energy as its oil and gas reserves decline.

Oil production fell 18% between 2003 and 2010 to about 34 million cubic meters, according to a document published in March by eight former energy secretaries. The document, which cites Energy Secretariat data, said proven oil reserves fell 11% to 393 million cubic meters during that period. It also said natural gas production fell 43% to 379 billion cubic meters in 2010, while reserves fell 8% to about 47 billion cubic meters.

The former officials, who have criticized current energy policies, said the decline in oil production coincided with a substantial increase in international oil prices, which should have led to increased exploration and production in Argentina.

But that didn't happen, they said, because of ongoing government price caps that have crimped profits and discouraged investment in exploration.

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