By Marcela Valente
BUENOS AIRES, Apr 1 2004 (IPS)

Argentina’s production and export of natural gas have grown unremittingly since the privatisation of the energy sector in the 1990s. But the failures of government regulation in that process, which left investment promises unfulfilled, are among the main causes of the country’s current energy shortfall, say experts.

This unregulated expansion is now showing its downside, with a sharp decline in gas reserves, lack of energy for the industrial sector and nearly half of the 37 million Argentines without household access to the natural gas distribution network.

The electricity deficit that emerged in the past few weeks – and a looming threat of blackouts – has its origins in the decision by the Carlos Menem government (1989-1999) to privatise and change its regulation policies for this strategic sector, say economists specialising in energy issues.

After the privatisation of the YPF oil enterprise and Gas del Estado during the first of Menem’s two terms in office, Argentina turned into a fossil fuel exporter. Thus, investment in infrastructure grew in accordance with the new foreign demand, but efforts aimed at the domestic market came to a halt.

“At that time fossil fuels went from a strategic to a marketable good, a commodity,” Gustavo Callejas, energy expert and former government secretary, told IPS.

Agreeing with that thesis, though with some nuances, are the Federation of Energy Workers, Grupo Fénix (made up of economists from the state-run University of Buenos Aires who are critical of the neoliberal economic model) and experts from the private consultancy Alpha, founded by former energy industry executives.

The Comptroller General of the Nation maintained that since the mid-1990s “structural failures” have been evident in monitoring the investments that the private companies promised to make, and which they used to justify rate hikes.

“There is chronic negligence in regulating” the industry, said chief government auditor Leandro Despouy.

Since privatisation, Argentina’s oil and natural gas exports increased “senselessly”, without paying attention to local laws that require private energy companies to first guarantee supplies to the domestic market and “maintain adequate levels of reserves” before exporting, said expert Callejas.

In Argentina, natural gas production grew from 19 billion cubic metres in the early 1990s to more than 50 billion today. Last year, 20 percent of that output went to the foreign market.

In the meantime, the economy grew 8.7 percent in 2003. That turnaround meant greater demand for energy. In the case of natural gas, consumption increased eight percent in the residential sector, 11 percent in industry, and jumped 70 percent for compressed natural gas (CNG) used to fuel automobiles.

But the benefits of the increased gas production were not distributed equally. Forty-four percent of the Argentine population does not have access to household natural gas distribution. They rely on the fuel sold in cylinders, which is much more expensive than natural gas distributed through a network.

The last gas pipeline built to supply the national market dates to 1988 and was the work of the company that was still state-owned, noted experts consulted by IPS.

In contrast, private capital that has been exploiting Argentina’s natural gas resources since 1992 invested in nine pipelines to sell the fuel to Chile, which is the destination of 70 percent of Argentine natural gas exports, and to Brazil and Uruguay.

Chile uses natural gas to generate 50 percent of the electricity it consumes.

“The privatised companies are not interested in providing this natural resource to people who don’t have jobs,” commented José Rigane, leader of the energy workers’ union, in reference to Argentina’s high unemployment and poverty rates.

The transnationals Repsol-YPF, Petrobrás and Pan American Energy are some of the main operators, and they are not investing in the domestic market or in exploration, said Callejas.

The privatisation model implemented in Argentina led the country from having reserves of natural gas enough for 35 years, to just a 10-year supply today, said economist Martín Schorr, researcher at the Latin American Social Sciences Faculty (FLACSO), in Buenos Aires.

The exploitation scheme aimed at the external market emerged also as a consequence of pricing policy. Callejas said that even though petroleum production costs companies just four dollars a barrel, the Argentine people have to pay 28.5 dollars, which is the price on the international market.

The private companies want to do the same thing with natural gas prices, he says. Rates lagged after the devaluation of the Argentine peso in early 2002, when the “convertibility” law was repealed after 10 years of maintaining the national currency at par with the dollar.

Since then, the price per cubic foot for natural gas exports has been 1.5 dollars, while on the domestic market it is sold at 40 cents on the dollar.

That difference allowed gas-fired power plants and industry to buy the fuel at a price that the Alpha consultancy considers far too low, with respect to what the same companies can get from sales to Brazil, Chile or Uruguay. That difference explains why there has been greater investment in international pipelines than in domestic infrastructure.

In a report by the Grupo Fénix, drafted in late March as the energy crisis emerged, also notes that Argentina’s reserves have diminished and that no new gas pipelines have been built for the domestic network since privatisation. The group of experts accuses the companies of engaging in manoeuvres to drive up prices on the national market.

Almost all observers agree that now the government of President Néstor Kirchner needs to establish an effective policy for preventing the crisis from growing worse.

So far, he has ordered limits on exports of natural gas “surpluses” (which triggered complaints from Chile), agreed to natural gas imports from Bolivia and Brazil, and is now considering levying taxes on the private energy companies.

Nevertheless, the experts say these measures will only make a small dent in the crisis, or merely put off the implementation of blackouts – the price of insufficient fuel supplies for the gas-fired power plants that provide around half of Argentina’s electricity.

Excerpt: