Argentina & Repsol sign US$8Billion gas deal

Argentina's government and Spanish energy giant Repsol-YPF signed a US$8 billion agreement in December to tap the nation's largest natural gas patch in a deal which a senior provincial official said could lead to the construction of a new long range pipeline. 
The extensive Loma La Lata field in the southwestern province of Neuquen will be drilled more deeply to augment existing reserves of 300 billion cubic metres of natural gas with an eye on the southern Brazil market and upstart competitor Bolivia. 
"At the start, the US$8 billion will go into exploration and development of new reserves, as well as operation and maintenance of the deposit," Neuquen Province Energy Undersecretary, Ricardo Rodriguez Alvarez told reporters.
"In order to increase reserves and production, another significant gasline will have to be built for the Buenos Aires area on through to Brazil," Alvarez said. 
The new line relieving a current gasline bottleneck serving Buenos Aires would run about 600 miles (1,000 km) from Neuquen to the federal capital and cost in the neighborhood of US$400 million, he said. The project will bank on supplies discovered during the next five years of drilling, he added.
He did not say which companies might be interested in building the pipeline, or how advanced this idea was. 
Repsol-YPF went forward with its US$8 billion plans for Loma La Lata, which supplies 40 percent of the local market, after obtaining a 10-year extension on its contract to November 2027. 
Formed in 1999, when Repsol bought Argentina's largest private company, YPF, for US$15 billion, the firm overcame doubts about relying on the local legal system after September allegations by a senator that a colleague offered her money from oil companies to support a new hydrocarbons law. 
"We think this accord will spur strong investments in Neuquen and in the country, while at the same time giving a legal framework for investments in the energy sector," Economy Minister JosŽ Luis Machinea said.
The Repsol-YPF commitment is a welcome shot in the arm for Argentina's US$280 billion gross domestic product that has been laggard for two years and is expected to barely grow in 2000. 
At the outset, the firm has to pay the federal government US$300 million over two years for the concession extension. 
"That US$300 million is more than welcome. This is a deal we've negotiated for a long time that wasn't easy...but really necessary," said Machinea.
Currently, Loma La Lata is pumping out a maximum 50 million cubic metres of natural gas daily tapped by 10 firms, led by Repsol, which dominates about 60 percent of the production. 
The bulk of the area's output is gas, with some nine remaining firms putting out a further 2,600 cubic metres daily of condensates, 1,500 cubic metres per day of gasoline and 400 tonnes a day of liquid-petroleum gas. 
"With this pact, more expensive investment in deeper horizontal exploration will be made to arrive at bigger natural gas reserves," said Alvarez.
"This deposit is the country's most important, and yet it's only a third of the Bolivian reserve," he said.
To sustain and increase production, exploration will have to be continual up to five years before the concession runs out, Alvarez said. 
A new trans-national gas line would complement a regional gas loop interconnecting Bolivia, Argentina, Chile, Brazil and Uruguay. The big target is Brazilian southern metropolis S‹o Paulo and nearby city P™rto Alegre, which are expected to lead Brazil's expected rise in energy demand of five percent annually over the next decade.