Argentina oil exports plunge; domestic refining output surges

Argentina oil exports plunge; domestic refining output surges

Buenos Aires (Platts)--28Aug2006

Argentina's oil exports plummeted 59% in the first half of 2006,
heightening concerns that the country is on track to become a net oil
importer, analysts said Monday.

Exports dropped to average 72,510 b/d in the first half of the year, down
from 178,100 b/d in the comparable 2005 period, according to recently released
preliminary Energy Secretariat data. The fall largely tracks dropping crude
output.

"This is the ninth year of decline in oil production, so everyday there's
less to export," Gustavo Calleja, a former federal undersecretary of fuels who
is president of an economic and political think-tank, Fundacion Arturo Illia,
told Platts. "We're getting to the point of becoming a net oil importer. We'll
be there in four to five years," Calleja said.

Oil production fell 3% to an average of 651,500 b/d in the first half
of the year from 672,000 b/d in the January-June 2005 period, according to the
secretariat. The annual averages in 2005 and 2004 were 665,000 b/d and 696,000
b/d in 2004, respectively.

Exports fell to 11% of its crude production in the first half of this
year from 27% a year earlier. Meanwhile, domestic demand is rising for
petroleum products.

"Refineries are working at nearly 99% of their capacity," Calleja said.

Refiners are also stepping up exports of gasoline, which they produce in
excess of domestic demand and pay a 5% tax on shipping abroad compared to the
25-45% tax rates on crude exports.

Cecilia Minguillon, an energy analyst at credit ratings agency Fitch
Argentina, said, "Margins are better on the export of gasoline than of crude."

Argentina's oil refining output shot up 9% in the first seven months of
2006 from a year earlier, the government's statistics office Indec said
Monday. It did not release the actual volumes.

Production of fuel oil rose 33% in the January-July period from a year
earlier, higher-octane gasoline spiked 21%, LPG surged 10.6% and gasoil
increased 9.1%, Indec said. At the same time, there was a 32% drop in
lower-octane gasoline production and a 30% decrease in diesel oil output, the
report showed.

The leading refiners in Argentina are units of ExxonMobil, Petrobras,
Repsol YPF and Royal Dutch Shell.

Petrobras plans to invest $650 million through 2010 to expand its
refining capacity in the country by 22% to 83,000 b/d, improve petroleum
product quality and step up capacity for processing of heavier crude, a
company spokeswoman said Monday. Repsol is investing $250 million to adapt its
106,000 b/d Lujan de Cuyo plant to refine a greater amount of heavier crude.

--Charles Newbery, newsdesk@platts.com

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