ARGENTINA: September 7, 2007


BUENOS AIRES - Argentina's government on Wednesday ordered the closure of Royal Dutch Shell's 100,000 barrels per day (bpd) refinery, citing environmental concerns.


The move comes amid increasing tensions between the company and the government of President Nestor Kirchner, which has clashed with the oil major over energy prices and supplies.

The facility, the Anglo-Dutch oil company's sole refinery in South America and located in the Buenos Aires province, was ordered shut after government officials detected leaks, contamination in soil samples and other infractions, the Environment Secretariat said in a statement.

The refinery will remain closed until "the company ends the dangerous situation for the environment," the statement said.

Shell officials did not immediately comment.

The decision marks the latest in a string of confrontations between the local unit of Shell and Kirchner that began in 2005 when the center-left leader called on Argentines to boycott the company's products after it raised prices.

Battling inflation has been the government's top economic priority. Argentine consumer prices last year rose 10 percent.

Gasoline and diesel prices have been virtually frozen in Argentina for more than four years due to a tacit agreement between oil companies and the government reached during Argentina's 2001-02 economic crisis.

Heightening tensions, the government recently levied some US$1.6 million in fines against local Shell executives, claiming the company failed to keep up supplies in the domestic market.

The decision led Shell Argentina President Juan Jose Aranguren to publicly claim the company was being singled out as a target by government officials.

Last year, the government moved to prevent Shell from selling a new diesel fuel above market prices.

Days after the company unveiled the new fuel, the government published a retroactive decree forcing energy companies to obtain permission before launching new products, which effectively forced the company to halt sales.


REUTERS NEWS SERVICE