Argentina’s Natural Gas Reserves Run Low

Jan. 11, 2006

Argentina is facing depleted reserves of natural gas, a situation that will force it to raise imports from Bolivia and/or limit exports to Chile, according a report by Industrial

Argentina is facing depleted reserves of natural gas, a situation that will force it to raise imports from Bolivia and/or limit exports to Chile, according a report by Industrial Information Resources (www.industrialinfo.com). As a result, research house predicts Argentina will have to increase energy prices, which have been frozen since 2002 to protect against inflationary trends in the energy sector.

Natural gas makes up 49 percent of Argentina’s energy consumption, and its citizens have grown accustomed to inexpensive natural gas and electricity, putting pressure on politicians to devise a solution to the depleted reserves that does not involve price increases. According to Industrial Information Resources, utilities in Argentina cost between one-fifth and one-third of comparable services in Brazil and Chile.

If Argentina’s natural gas reserves run out, Industrial Information Resources says the country will be forced to purchase supplies from the international market, exposing energy costs to international natural gas prices. In order to avoid such an end result, Argentina will need to encourage natural gas exploration of regions believed to have deposits of natural gas.

Compounding Argentina’s natural gas problem, Bolivia’s new president, Evo Morales, has vowed to use his country’s natural gas resources to help fight against poverty in his country. This could limit Argentina’s ability to import cheap natural gas from Bolivia, where reserves are abundant and have traditionally been made available to Argentina at a relatively inexpensive price point.

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