Argentina Pan American Ups Oil Reserves at Cerro Dragon

Argentina's No. 2 oil producer, BP PLC (BP)-controlled Pan American Energy, has announced a mild increase in reserves, of 100 million barrels of oil equivalent, at the 50-year-old Cerro Dragon field it operates.

The company confirmed the reserves increase in a statement released after a Monday night meeting between President Cristina Fernandez de Kirchner and the head of Argentine oil company Bridas, which controls the minority stake in Pan American Energy.

The company also said it plans to invest $1 billion this year in its Argentine operations.

The news comes as the nation's oil reserves are steadily declining. Analysts expect Argentina to become a net importer of oil by the end of the decade and the additional 100 million barrels of oil equivalent would effectively delay that outcome by a few months.

Unlike some other large oil producers, Pan American Energy has increased production in recent years, with oil output climbing to 219,640 barrels of oil equivalent a day in 2007 from 121,000 in 2000. Gas production at its Acambuco area, near the Bolivian border, meanwhile, has jumped to 9 million cubic meters a day from 2 million cubic meters a day in 2001, the company said.

Oil companies operating in Argentina have struggled amid price controls and heavy pressure from government officials under Fernandez and her predecessor and husband, Nestor Kirchner.

Some analysts believe that in addition to providing Argentines with cheap energy, the government pressure aims to increase Argentine ownership of oil and gas assets by making it less attractive for foreign majors to operate here.

Late last year, the government hiked oil export taxes, a move that industry observers say especially hit Pan American Energy. By means of comparison, the nation's top oil producer, Repsol YPF (REP), sends most of its locally produced crude to its Argentine refineries.

Industry officials believe the nation's hope for greenfield oil discovery lies in deep offshore blocks, although they add that government intervention under the Kirchners has done little to promote the speedy exploration of those areas.

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