By Marcela Valente
BUENOS AIRES, Sep 19 2006 (IPS)

In a race against time, the Argentine government is fomenting investment in the energy industry to respond to growing demand and ward off a collapse that would dampen economic growth.

With consumption nearly reaching installed capacity and the prospect of the exhaustion of the country’s natural gas and oil reserves looming ever closer, the rate of gross domestic product (GDP) growth, which has averaged eight percent a year since 2003, is now jeopardised.

The threat of blackouts and energy rationing for large consumers was already faced by the government in May 2004, when shortfalls of natural gas forced Argentina to suspend exports to neighbouring Chile.

As in 2004, the main concern today is the power industry’s inability to keep up with the growth in demand.

Natural gas provides 53 percent of this South American country’s electricity, through thermal plants. Another 43 percent comes from hydropower plants, and four percent from nuclear plants.

The Federal Planning Ministry has announced nearly 6.5 billion dollars in investment in thermal, hydroelectric and nuclear plants, but the fear is that the increase in electricity generation will arrive too late.

Because of that high level of consumption, the government announced that as of November, large consumers – some 5,000 companies that account for 40 percent of demand – will have to equip themselves with generators to make up for the difference between last year’s consumption and this year’s, if it has risen.

Top priority will thus be given to consumers in residential areas, small and medium companies, public institutions and street lighting, with the major consumers coming last in line.

This decision, which has upset a number of large firms, will force them to acquire or begin to use their own generators to cover the difference between what they consumed in 2005 and what they consume this year.

With these measures and the imminent launch of a public awareness campaign on the need to ration the use of energy, the government of Néstor Kirchner is seeking to gain time until the current investments begin to bear fruit.

The Ministry says that to respond to the needs of the productive sector, it will have to expand installed capacity by 1,000 megawatts a year.

The gap between available gas supplies and current demand is driving up consumption of diesel and fuel oil to fire the country’s thermal plants. These fuels are diverted from the rural sector, where they are used for farm machinery.

De Vido has already announced that the government is working on increasing the capacity of the Argentine-Paraguayan Yacyretá dam, on the northern Argentine border, and that the government plans to complete Atucha II, a nuclear plant that began to be built in 1981 but whose construction came to a halt in the 1990s.

Funds are also being invested in Corpus, another Argentine-Paraguayan dam, and in Garabí, an Argentine-Brazilian hydropower plant. But these projects will only begin to bear fruit within the next six to 10 years.

A shorter-term project is the construction of two combined-cycle thermal power plants, one in the city of Campana, in Buenos Aires province, and another in Rosario, in the northeastern province of Santa Fe.

These plants should begin to operate in 2008, although there have been delays in the bidding process. And time is running short.

In an interview with IPS, economist Alberto Muller, an expert in energy questions, explained that power shortages have a multiplicity of causes, but that a major problem is that the state lacks reliable information on the country’s oil and natural gas reserves.

Muller belongs to the Grupo Fénix, a group of University of Buenos Aires professors who have designed economic policy proposals aimed at counteracting the effects of the free-market, neoliberal model applied in the country in the 1990s.

The Secretariat of Energy reported this month that the country’s natural gas reserves, which stood at 35 years of consumption prior to the privatisation of the sector in the 1990s, dropped from 10 to 8.6 years between 2004 and 2005. Oil reserves, which stood at 13 years at the time of privatisation, dropped from 9.1 to 8.4 years in that same period.

That modification led the government to rush through a bill to foment investment in exploration for oil and gas, an initiative that has been criticised by the opposition because it offers the companies tax exemptions.

Opposition lawmaker Claudio Lozano, of the small Fuerza Porteña party, said it was better to revoke the decrees that in the 1990s freed up the country’s gas and oil reserves for export, and proposed creating a national database on the reserves.

Lozano, an economist with the Central de Trabajadores Argentinos (CTA) trade union federation , questioned the lack of public control over the country’s oil and gas reserves, saying the government simply takes the reports by the oil companies exploiting the reserves at face value.

Muller said that what is needed is improved oversight of the reserves, investment in exploration, and an increase in the industry’s installed capacity. In that sense, the government is moving in the right direction, he said. “If the thermal plants are completed on time, we’ll have a reasonable outlook for the next four years,” he predicted.

But what will be more difficult, he added, is to accelerate the investment in Atucha, Yacyretá and other power plants. In these cases, results will take six to 10 years, he said.

On the other hand, he concurred with Lozano on the need to curb exports of oil and gas. “The Chileans will get mad, but as the reserves continue to shrink, we can’t think about continuing to export,” he said.

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