Guillermo Moreno, secretary of domestic commerce (photo courtesy of Wikipedia)

The Argentine federal government announced this morning that it would freeze fuel prices at their current levels for the next six months. The measure is meant to combat the country’s ever-increasing costs of living and avoid a situation of hyperinflation, which is especially important this year as congressional elections are scheduled for October.
According to Guillermo Moreno, secretary of domestic commerce, Argentina’s service stations are to maintain prices at yesterday’s closing levels until 9th October 2013. The announcement appeared in this morning’s official bulletin, issued by the Casa Rosada as resolution 35/2013. The measure is to become effective tomorrow.

The text states that although prices will remain steady, “With…the application [of the price freeze] the companies that deal with the distillation and commercialisation of petroleum and its derivatives will remain in charge of informing…their clients of the [actual] higher prices [of fuel] in each region.”

Price freezes will be applied across the board, with gasoline costs levelling at yesterday’s rates as they appeared in different areas of the country. The measure divides Argentina into six regions that will maintain respective fuel prices: the capital and province of Buenos Aires; Patagonia (Neuquén, Río Negro, Chubut, Santa Cruz, and Tierra del Fuego); Cuyo (San Juan, San Luis y Mendoza); the Northwest (Jujuy, Salta, La Rioja, Tucumán, Catamarca, y Santiago del Estero); and the Northeast (Formosa, Chaco, Misiones, Corrientes y Entre Ríos).

Fuel companies have already announced their disagreement with the freezes, stating that it will be impossible for them to “sustain and control” prices and that the measure only represents a feeble attempt at helping the economy and will, in fact, severely damage companies like YPF, which is the country’s partially-nationalised petrol company.

Moreover, according to Manuel García, head of the national group Independent Service Station, “The question is what is going to happen to the other price variables that service stations have. What is going to happen to salaries? Are they going to freeze them too? What about gas or electricity?”

The resolution explains that if service stations fail to comply with the price freezes, the Law of Supply, which determines penalties for companies who don’t abide by regulatory measures, will be applied.

YPF chief executive officer Miguel Galuccio (photo courtesy of Wikipedia)

YPF’s La Plata refinery is returning to business after resuming its fuel shipments on Saturday. Additionally, the plant is expected to re-open within the next 30-45 days, YPF chief executive officer Miguel Galuccio said in a press conference today.

Galuccio added that YPF’s fuel prices will remain unchanged, and will not rise as a consequence of the refinery’s fire last week.

YPF’s La Plata-based Ensenada plant produces around 188,000 barrels a day, although Galuccio said that “the impact of the fire was not significant in relation to the size of the company”, and that “the insurance has covered the material damages and loss of earnings”.

However, the refinery, which represents half of its overall production, is expected to take between four to eight weeks to reach 80% of its maximum capacity.

To offset this decline, Galuccio told the press conference earlier today that the company may have to increase its fuel imports from 10 to 15/16% in order to reach its domestic supply demands.

However, he stressed that, contrary to local media reports, the company will not be implementing price hikes on its fuel supply.

YPF Refinery (photo courtesy of Casa Rosada)

In the midst of a massive downpour that left dozens dead, an oil refinery caught fire in Ensenada, on the outskirts of the city of La Plata, and was not completely put out for six hours. The oil refinery was operated by state-run company YPF.

“The emergency in these units came amid this climate phenomenon, by an extraordinary accumulation of rainwater and a power outage in the entire complex,” explained a YPF press release.

The fire began at 8pm on Tuesday and was eventually extinguished by YPF staff and volunteer firefighters from neighbouring towns. The fire began in a coking oven in the refinery, located in the Industrial Complex of La Plata roughly 65km south of the city of Buenos Aires.

The plant is capable of refining 188,000 barrels of oil on a daily basis.

The flooding in La Plata was caused by a downpour of more than 400mm in the span of two hours on Tuesday. More than 35 lives have been reportedly claimed by the devastating torrent.

No casualties were reported as a result of the fire. The oil refinery is the largest in all of Argentina.

Argentina’s state-owned oil company YPF has issued its second bond for retail investors in a bid to help the country integrate back into the capital markets.

Argentine Pesos (Photo: Alex E. Proimos on Flickr)

The one-year bond carries an annual interest of 19% and is placed at $100m by YPF, with the possibility of reaching $300m depending on demand. Subscriptions for the bond start from $1,000 and go up to $250,000 and will close on 1st March.

YPF bonds are currently offering a more attractive rate than those of local banks. The bond will appeal to small investors and savers who are unable to buy dollars due to government restrictions and who wish to secure their savings in light of Argentina’s inflation rate, estimated to be running at around 25%.

YPF’s first bond issue, which closed at the end of 2012, was placed at $50m and was oversubscribed by 115%. This time around, the bond is backed by 18 underwriters, double the number of the first issue.

“We are very excited to participate in this operation that encourages Argentines to turn their savings into productive investment,” said Brian Joseph, commercial manager of Sociedad de Bolsa Puente, one of the participating banks in the transaction.

“The attractiveness of this bond for retail savers, is that it will have a secondary market since it will be listed on the Buenos Aires stock exchange and the electronic open market,” Joseph added.

YPF was expropriated by the government in May 2012, after more than two decades in private hands.

Road map of Santa Cruz & Chubut Provinces. By thejourney1972 (South America addicted), on Flickr

At 5pm tomorrow afternoon president Cristina Fernández de Kirchner and the head of YPF Miguel Galuccio will announce plans to begin exploration of unconventional oil resources in the province of Chubut. This will be the president’s first visit to an YPF site since the companies’ nationalisation in May last year.

According to estimates from the national oil company, the oil fields of Aguada Bandera could yield up to 50bn cubic feet of natural gas. Well D-129, which overlooks the Gulf of San Jorge, could yield a further 45bn cubic feet of gas. The exploration and subsequent exploitation of the oil fields discovered last August will demand both a high level of skill and expertise as well as a substantial amount of investment.

The two oil fields located just outside the city of Comodoro Rivadavia are thought to have as much potential for development as the Vaca Muerta field located in the province of Neuquén which holds reserves of roughly 270bn cubic feet of gas. This untapped potential in Chubut coupled with the fact that Argentina has the third largest amount of unconventional oil reserves in the world, are key selling points for attracting both local and international investors.

YPF has signed deals with North American oil company Chevron, as well as the Argentine company Bridas. Successful collaboration will greatly enhance YPF’s prospects for further exploration.

YPF by SEOWEB2, on Flickr

A group of 20 protesters are currently stationed at the entrance of two YPF wells owned by Quintana and UAF.

According to the secretary of Security of the Province of Neuquén, Gustavo Pereyra, the action was headed by Norma Paccini, who has previously staged several roadblocks.

The aim of the protest is to secure jobs for the currently unemployed workers.

The unemployed workers are manifesting with the objective of getting jobs. The protest is based around the access points to the two wells, located 10km from Añelo.

Pereyra added that the protesters have asked for representatives of the Private Gas and Petrol Union to meet with them in order to answer their demands.

Manuel Arévalo and Ricardo Luis Saporiti were appointed as new directors of YPF during the board of directors meeting in the headquarters of the company in Puerto Madero.

Arévalo is acting secretary general of the Union of Gas and Petroleum Workers of Neuquén, Río Negro and La Pampa. He will replace Guillermo Pereyra, who resigned a week ago. Arévalo founded the union in 2000 and has developed a career of a union leader.

Saporiti will replace Oscar Lamboglia, who also stepped down from his position a week ago. Saporiti is an industrial engineer and regional director for training and projects and representative of OFEPHI (Federal Organisation of States – Productors of Hydrocarbon). He also worked as a management consultant and advisor on energy efficiency issues. Saporiti worked in various companies on a regional level, and has an educational background in business and development and operations of commercial networks.

YPF is the largest oil company in Argentina and operates 52% of the nation’s refinery capacity in three facilities and 1,600 filling stations. It was renationalised in 2012 by the government of Cristina Fernández de Kirchner.

Although the Colorado River seems to have normalised after a storm that washed oil production residue through the watershed last weekend, officials remain concerned about oil spill consequences.

A heavy downpour late on Saturday night and early Sunday morning caused water and mud runoff to flow into lowlands where YPF and the Brazilian oil company Petrobras extract oil. The force of the runoff broke cables from production wells, sweeping hydro-carbonic waste and water high in salt into the watershed. Both companies commenced sanitation projects in the affected areas. Spill protection company Emergencia Petrolera lined the riverbed with barriers in the case of further rains or runoff from pre-existing toxic substances. All companies as well as affected jurisdictions remain on alert for similar rains forecasted for next few days.

Engineer Miguel Boyero stated that although the water that washed from lowlands into the river had a high amount of salt, little hydrocarbon actually reached the river. Both Río Negro and La Pampa have performed studies on the river water, both of which came back negative for dangerous substances.

Carlos Yemma, head of the Intrajurisdictional Colorado River Committee (COIRCO), reported that the situation was not as serious as it could have been because “there was little volume and Petrobras acted quickly.” He says the spillage amounted to 100 cubic metres, “less then the volume that arrives at the river basin per second, which is 150 cubic metres.”

Meanwhile, local legislators Magdalena Odarda of Río Negro and Beatriz Kreitmann or Neuquén have appealed to COIRCO to “ordain an immediate and profound investigation into the episode” and to “dispatch all the means of control it deems necessary to avoid the continued degradation of life in the Colorado River due to the shared irresponsibility of the companies that exploit the extraction and transfer of hydrocarbons.”

Ricardo Esquivel, head of Neuquén’s environmental department, reiterates their firmness, insisting that the spill was indeed significant “for the enormous environmental impact that it generated” and reiterated that above all, the province would remain resolved about regulating non-conventional oil and gas drilling.

The 1,100km Colorado River cuts through northern Patagonia on its way from the Andes mountain range to the Atlantic Ocean. It is used for agricultural irrigation and hydroelectric energy.

All seven members of the Cinco Saltos City Council voted unanimously to ban the unconventional exploration or extraction of hydrocarbons, including hydraulic fracture, the shale gas and oil drilling technique known more commonly as ‘fracking’. The ordinance cites human health and environmental consequences that could result from “contaminating emissions”. According to councilman José Chandía, the ordinance’s author, Cinco Saltos is the first jurisdiction in Latin America to establish such a ban.

The town of 27,000 has already suffered mercury contamination via the chemical product Indupa during the 1990s. It lies in the north-western corner of Patagonian province Río Negro, not far from the Vaca Muerta oil basin, the largest unconventional deposit in Latin America, according to the Argentine government and oil company YPF. The Chevron Corporation and YPF finalised an agreement to exploit Vaca Muerta yesterday.

One of the primary concerns detailed in the ordinance is water supply safety. “The extraction generates amounts of liquid waste that contain dissolved chemicals. There is no guarantee that these liquids remain contained and are not circulated in the drinking water.” It continues by describing them. “For each perforation, 200,000 cubic metres [of water] are needed for the hydraulic fracture. Five hundred chemicals are used, among them 17 toxic to aquatic organisms, 38 severely toxic, and eight proven to be carcinogenic. These chemicals mean a total of four tonnes of toxics per well.”

Water remains a primary concern because so much is used in the fracking process. The technique requires a large quantity of water and pressurized chemicals to break the ‘mother rock’, release the hydrocarbon inside, and pump it above ground.

The law diverges from the national government’s general enthusiasm for fracking opportunities. Last June, YPF head Miguel Gallucio revealed the company’s five-year plan, which includes an initial investment of US$1.36bn to test unconventional drilling techniques, with more slated for 2013-2017. To Chandía, the ordinance “is against the national government’s political decision to advance fracking.” Pablo Domínguez of the Comahue Permanent Assembly for Water (APCA) adds, “We are demonstrating that the community can decide what future it wants and how it wishes to live, and not leave those decisions in the hands of the government or corporations.”

The Buenos Aires Federation of Fuel (FECOBA) confirmed that they will ask Buenos Aires Province’s governor Daniel Scioli for help to avoid running out of gasoline.

The Atlantic Coast has started the first days of the new year with a problematic lack of gasoline that has created long lines and vacationers left with empty tanks. The lack of gasoline has in some places resulted in gas stations closing early after completely running out  of fuel.

For this reason FECOBA will be requesting the intervention of governor Scioli to help avoid stock shortage.

FECOBA’s chairman Luis Malchiodi said “We will ask for the governor to take part in solving this problem, because during previous years he saw to it and we solved it together.”

The general secretary of the organisation blamed the company Shell for the shortages, accusing them to “leave the market too suddenly”.

“This”, he said “caused the customers to run to other companies that were not prepared for the suddenly increased customer load.”

Worst affected regions are touristy areas along the coastal roads 2 and 11. Towns like Mar del Plata, San Bernardo and Mar de Ajó have suffered most chaos with gas stations full of returning vacationers trying to refill their vehicles.

The shortage of gasoline occurred in the same week as the nationalised YPF applied a 6% rise to fuel prices.