Argentina Ends Tierra Del Fuego Oil, Gas Export Tax Breaks

Dow Jones Newswires

OSLO Oct 12, 2006 (Dow Jones Newswires)

The Argentine government has ended oil and natural gas export tax breaks for companies operating in the nation's southernmost province of Tierra del Fuego.

The move will bring more money into federal coffers by cutting into the margins of operators including France's Total (TOT), Chile's state-run Enap-Sipetrol, BP PLC (BP)-controlled Pan American Energy, and U.S.-based Apache Corp. (APA).

The change will also force natural gas producers to re-negotiate long-term contracts with the region's top client - Canada-based Methanex (MEOH), which produces methane near the Chilean city of Punta Arenas, industry officials said Thursday.

Methanex's Chilean plants have a production capacity of 3.8 million tons of methanol per year, producing about 12% of the world market for methanol, a chemical compound used in fuel and plastics.

The change, outlined in Resolution 776 published in Wednesday's Official Bulletin, came as a surprise to industry officials.

"The government has reinterpreted a law that has been in effect for six years," said one official.

The reinterpretation comes, however, as the government struggles to overcome energy shortages fueled by a lack of industry investment after nearly five years of government price controls.

In recent weeks, the government has stepped up its anti-business rhetoric and Thursday published a resolution that reactivates a 1974 "supply law" that allows for fines and imprisonment of company executives who do not supply goods - in this case, diesel fuel, which is running short as farmers prepare to plant soy.

Industry officials said Thursday that companies were still evaluating the economic impact of the Tierra del Fuego change and the reactivation of the "supply law."

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