report no. 7993-ar argentina energy sector...

Report No. 7993-AR

ArgentinaEnergy Sector Study(In Two Volumes) Volume II: AnnexesFebruary 26, 1990

Infrastructure and Energy OperationsCountry Department IVLatin America and Caribbean Regional Office

FOR OFFICIAL USE ONLY

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FOR OMCUAL USE ONLY

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Annex 1.0: Official and Adjusted Hydrocarbon ReservesAnnex 1.1: Institutional Structure of the Hydrocarbon SubsectorAnnex 2.Os Taxes, Royalties, and Earmarked FundsAnnex 2.1: Public and Private Energy Investment Shares and Growth RatesAnnex 2.2: Projection of Foreign Debt 1989-1995Annex 3.1: Comparison of PricesAnnex 3.2: LPG PricingAnnex 3.3: Details of SEGBA's Tariff r'-e.emAnnex 3.4: Example of Subsidies and ristortions in the Hydrocarbon SubsectorAnnex 4.0: Implementation of Deregulation of Crude Oil and Oil Products PricesAnnex 4.1: Controlled Transition to a NPv Natural Gas Pricing SystemAnnex 4.2t Reforming Institutional Arrangements on Gas Production and TransmissionAnnex 4.3: Cost Based Tariffs for Tranesission and DistributionAnnex 4.4: Netback to Producers from Reformed Pricing SystemAnnex 5.1: YPF and Service ContractsAnnex 5.2: History of Wells Drilled (1977-1988)Annex .3t Crude Oil Production History & Refinery Runs (1977-1988)Annex 5.4: Natural Gas Production & Utilization History (1977-1988)Annex 5.5: Production Operating Costs of YPF Administration - Oil & GasAnnex 5.6: Incremental Prod. CostsAnnex 5.7s Incremental Net IncomeAnnex 5.8: Investment Requirements for the Next Five YearsAnnex 5.9: Hydrocarbon Deregulation Decrees 1055, 1212 and 1589 (all issued

fourth quarter 1989;Annex 6.1: Evaluation of YPF snd Private Refinery CapacityAnnex 6.2: Inefficiencies in Present Refinery OperationsAnnex 7.1: Average Incremental Cost Calculation for GasAnnex 7.2(a)t Netback Value Calculations for GasAmnex 7.2(b)s Petrochemical SectorAnnex 7.3: LPG Production by SourceAnnex 7.4: Methodolgy for Calculating Financial CostsAnnex 8.1: SE's Ene jy Plan Electricity Demand ScenarioAnnex 8.2: Most-Likely Electricity Demand ScenarioAnnex 8.3: Low Electr.,zity Demand ScenarioAnnex 8.4: Electricity Demand Projection - Three ScenariosAnnex 8.5: Investment Requirements Under ?wo Demand ScenarioAnnex 8.6: Estimated Generation Cost of HydroprojectsAnnex 8.7: Installed Capacity by Company by End 1987 (MW)Annex 8.8s Age of Major Thermal PlantsAnnex 8.9: Scheduled Retirement of Major Thermal PlantsAnnex 8.10: Evolution of Unavailability of Thermal Plants (NIS)Annex 8.il: SEGBA: Electricity Rates for Residential 'onsumers in October 1989Annex 8.12: SEGBA: Electricity Rates for Industrial C.nsumers in October 1989Annexes 9.1-Annex 9.5s Energy BalancesAnnex 9.6t Household Expenditures on EnergyAnnex 10.1: Projections of Income and Expense 1989-1995 (Individual Companies)Annex 10.2: Projections of Income and Expense (Consolidated)Annex 1C.3: Projections of Balance Sheet 1989-1995 (Individual Companies)Annex 10.4: Projections of Br.lance Sheet 1989-1995 (Consolidated)Annex 10.5: Projections of Source and Use of Funds 1989-1995 (Individual Companies)Annex 10.6: Projections of Source and Use of Funds 1989-1995 (Consolidated)Annex 10.7: Projections of Source and Use of Funds 1990-1995 (Power Co's. and

Yacyreta)Annex 11: Written Government Comments received December 1989, on Green Cover

Version of Energy Sector Report (dated August 1989)..

This document ha a restricted distribution and may be used by recipients only .n the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Annex 1.0Page 1 of 27

ARGENTINAOFFICIAL and ADJUSTED HYDROCARBON RESERVES

Responsibility for Reserves Evaluations

1. With exception of minor old concession areas, the Government ofArgentina is the legal owner of all hydrocarbon reserves. The Stateentity, Yacimientos Petroliferos Fiscales (YPF), has been assignedthe objective of implementing the Argentine petroleum policies and ischarged with the study, the exploration and exploitation of liquid orgaseous hydrocarbon reservoirs, as well as the industrialization,transport and commercialization of these products and theirderivatives. Thus, it follows that YPF is responsibile for preparingperiodic reserves evaluations of crude oil and natural gas, andproviding official reports of remaining reserves volumes to otherGovernment agencies. These official reserves reports are normallyissued by YPF as of the end of each calendar year. No audit of YPFFstotal hydrocarbon reserves has ever been made by an accreditedindependent consulting firm.

Reserves Evaluations by YPF

2. Reserves evaluations have been prepared by YPF for many years.Geologists and reservoir engineers employed by YPF and who work int*h Carencia de 1:ineria y ueologia de Explotacion (GkGE), have theexperience and capabilities required for adequate determinations ofall hydrocarbon reserves. Although the GMGE does not have fullcapability of performing mathematical modeling of hydrocarbonreservoirs, they are making strong efforts to obtain the necessaryhardware and software to provide in-house reservoir modelingapplications of this sophisticated technology. Until such time thatthe GMGE has obtained this hardware and software and trained theirprofessional people with this capability, they are utilizing theservices of a private Argentine firm, INLAB, to perform reservoirmodeling evalu.tions of their more importait reservoirs.

Criteria and Reserves Definitior!

3. During different time periods, the criteria and definitionswhich YPF employed for reserves determinations were changed,resulting in reported volumes of reserves which were not necessarilycomparable between the same reservoirs or fields. Since 1984, theGMGE has used a written guide for reserves, "Definition of Reservesfor the Internal Use of YPF"'. As described in that guide, YPF hasintroduced a unique concept, termed 'conditional", as applied to thegenerally accepted reserves terminology utilized within the petroleumindustry. This term is applied to reserves, proved or probable, inany case where the expio:itation of such reserves iLs *onditionai xnother factors that impede the actual exploitation of these reservtes,such as not having facilities to collect the gas, or the lack ofimplementation of special exploitation techniques, or whatever othercause that does not permit actual exploitation of the subjectreserves. However, in the annual publication of official reserves,YPF does not identify which proved or probable reserves are categor-

- 2- Annex 1.0Page 2 of 27

ized as "conditional"; this results in confusion and a generalmisunderstanding of the actual reserves situation.

YPF Reserves pefinitiona

4. The follcwing definitions were extracted from the reserves guideused by GMGE ia the determinations of YPF official reserves:

A. RESERVES: the volume of liquid or gaseous hydrocarbons (atstandard conditions) existing in a reservoir, of which apercentage is feasible to be extracted in a profitable formunder existing technology, whether by natural reservoir energyor added energy by means of special methods. As a function ofthe measure of uncertainty, reserves can be subd4vided in:

1. PROVED: The proved reserves are estimated quantitiesthat geological and engineering data demonstrate withreasonable certainty will be recovered in the future, fromknown reservoirs and under existing economic conditions.

2. PROBABLE: As indicated by ths name, those reserveswhich are more uncertain than proved reserves, having lesscertainty of lithological continuity and petrofisicalcharacteristics of the reservoir.

B. TERMS IN COMMON USE: included below are terms which areapplicable for petroleum as well as gas.

le ORIGINAL RESERVES IN-SITU: the volume of hydrocarbonsexisting in the reservoir under surface conditions prior toexploitation, expressed in m3.

2, ORIGINAL RECOVERABLE RE11WRVES: the volume ofhydrocarbons that can be extracted from a reservoir eitherby natural energy or the addition of artificial energy.

3. FACTOR OF RECOVERY: the value in percent of theoriginal reserves in situ that can be extracted from areservoir during its useful life. This is expressed in Xand in case it cannot be calculated by one of the knownmethods, average values for the basin and type ef reservoirwill be applied.

4. EXTRACTED: accumulated volume of hydrocarbonsrecovered, expressed in m3.

5. REMAINING RECOVERABLE RESERVES: the value resultingfrom deducting the volume extracted from the originalvolume of recoverable reserves, expressed in m3.

The above descriptions and previous definitions constitute

Annex 1.03 Page 3 of 27

the maximum level of reserves details, for whatever hydrocarbonsubstance.

1. CRUDE OIL

1.1. PRIMARY RESERVESPrimary reserves are defined as the volume of crude oil

at surface conditions that can be extracted by naturalresarvoir energy.

1t1.1. PROVED PRIMARY RESERVESThe volume of primary reserves that can be

considered proved by the definition oased on thecharacteristics.

1.1.l.t. PROVED PRIMARY RESERVES NOT CONDITIONALProved primary reserves corresponding to reservoirs

that by their characteristics ot low GOR or existinginstallations for natural gas collection permitcontinuous and rational production.

1.1.1.2. PROVED CONDITIONAL PRIMARY RESERVESWithin this subdivision are included proved primary

reserves pertaining to reservoirs, that because of thetype (gas-condensate, extra-heavy crude oil, etc.) havetheir exploitation conditional on gas collection, or onthe implementation of special exploitation technologiesor whatever other cause that could impede their actualexploitation.

1.1.2. PROBABLE PRIMARY RESERVESThe volume that could be extracted by primary

exploitation, from the probable original in-situreserves. For this determination the recovery factorutilized for proved primary reserves will be assumed asvalid.

1.2 * SECONDARY RESERVESThe additional volume of crude oil or 4.ondensate that

could be extracted from the reservoir as a consequence ofinJecting water or gas.

1 .2.1. PROVED SECONDARY RESERVESConsidered to be that volume substantiated by a

secondary recovery study.

1.2.1.1. PROVED SECONDARY RESERVES NOT CONDITIONALThe reserves corresponding to an integral project,

the evaluation of which does not depend upon theresults of a pilot project.

- 4 - Annex 1.0Page 4 Of 27

1.2.1.2. PROVED SECONDARY CONDITIONAL RESERVESUnder this classification are included the reserves

of pilot projects until definite evaluations can bemade and that of extensions or remainder of the projectuntil the results and conclusions obtained from thepilot certify the convenience of implementing the fullproject. Is=

1.2.2. PROBABLE SECONDARY RESERVESUnder this category are included the reserves to be

obtained by secondary recovery from those reservoirs thatoffer good prospects but no studies have been finalizedwith which to implement an actual pilot project.

2. NATURAL GAS

2.1 PROVED RESERVESThose volumes that correspond to the definition of

proved.

2.1.1. PROVED RESERVES DISSOLVED GASAll crude oil at reservoir conditions contains a

certain determinable volume of dissolved gas;osemve!!.tly, thte value of proved di-^lvzd ga3 isdirectly related to the proved crude oil reserves.

2.1.1.1. PROVED DISSOLVED GAS NOT CONDITIONALThose reservoirs with a very low gas-oil ratio, so the

gas can be vented, or that have surface installationsadequate for collecting the gas. The reservoir shouldalso be exploited in a rational manner.

2.1.1.2. PROVED CONDITIONAL DISSOLVED GASIncludes those reservoirs with gas-oil ratios above

that permitted for venting the gas, and that do not havegas collection facilities, or the lack of transportcapacity or reinjection capacity.

2.1.2. PROVED RESERVES OF FREE GASUnder the classification of free gas reserves are

included all gas that is not normally dissolved in crudeoil, irregardless of its relation to the crude oil. Inorder to differentiate the types of tree gas, terms areapplied to distinguish between (1) gas-caps associatedwith crude oil. (2) gas-condensate, and (3) dry gas orreservoirs where the gas-oil ratio is above 20,000 m3,m3.This free gas must also satisfy the definition of provedreserves.

Annex 1.0-5- Page 5 of 27

2.1.2.1. PROVED FREE GAS RESERVES NOT CONDITIONAL'hese reserves pertain to those reservoirs, with

free gas, that produce volumes according to theirpotential, that do not interfere with the final oilrecovery, and that have adequate facilities installedto collect the volumes of gas produ-ed.

PROVED CONDITIONAL FREE GAS RESERVESThese reserves pertain to those reservoirs with

proved free gas that, (a) do not have facilities forcollecting the gas produced, (b) if facilities exist,they are not adequate for the potential of thereservoir, and (c) the production fluctuates accordingto the seasonal fluctuation of gas collection.

5. It is evident that the inclusion of. conditional"' reserves,interpreted to be those for which one or mo-e basic conditions doesnot exist to permit the rational economic production of thosereserves, leads to misconccptions as to the actual volumes ofhydrocarbons that can be recovered under existing conditions. TheYPF definitions of proved secondary reserves, both conditional andnot conditional, are not acceptable to the international petroleumindustry. A study of secondary reserves, irregardless of theexperience and reputation of the organization preparing such stucy,is nothing otore than an indication of the prospective vou-mame ofsecondary -eserves to be recovered. Successful actuai response froman install.d secondary recovery project must provide support for theengineering study on which the project is based before those reservescan be classified as proved. YPF has included as proved reserves alarge volume of secondary reserves, mainly from estimations providedby contractors at the time of bidding on the contract areas. Eventhough subsequent experience has demonstrated that these secondaryreserves volumes will not be recovered under existing economic andtechnical conditions, YPF has not made appropriate reductions intheir official proved reserves reports.

6. After a number of years of research and exchange of conceptsregarding various definitions being utilized by internationalpetroleum companies pertaining to reserves of hydrocarbons, inFebruary 1987, the Society of Petroleum Engineers (SPE) approveddefinitions of reserves that they believe will be accepted by mostGovernments and companies concerned with the hydrocarbons industry.As a comparison with the definitions of reserves being utilized byYPF, extracts from the definitions acceptable to SPE are included asfollows:

A. RESERVES: estimated volumes of crude oil, condensate.natural gas, natural gas liquids, and associated substancesanticipated to be comercially recoverable from knownaccumulations from a given date forward, under existing economicconditions, by established operating practices, and undercurrent government regulations. Reserves estimates are based oninterpretations of geologic and/or engineering data available at

-6 - Annex 1. 3Page b or 27

the time of the estimate. Reserve estimates generally will berevised as reservoirs are produced, as additional geologicand/or engineering data become available, or as economicc nditions change. All reserves estimates involve some degreeof uncertairty, depending chiefly on the amount and reliabilityof geologic and engineering data available at the time of theestimate and the interpretatior of these data. The relativedegree of uncertainty may be conveyed by placing reserves in oneof two classifications:

1. PROVED: Proved reserves can be estimated withreasonable certainty to be recoverable under currenteconomic conditions. Current economic conditions includeprices and costs prevailing at the time of the estimate.Proved reserves may be developed or undeveloped.

a) Reserves are considered proved if commercialproducibility of the reservoir is supported by actualproduction or formation tests. The term proved refersto the estimated volume of reserves and not just to theproductivity of the well or reservoir.

b) The area of a reservoir zonsidered proved includes(1) the area delineated by drilling an" df-"ed byfluid contacts, if any, mnd (2) the undrilled areasthat can be reasonably judged as commerciallyproductive on the basis of available geological andengineering data. In the absence of data on fluidcontacts, the lowest known structural occurrence ofhydrocarbons controls the proved limit unless otherwiseindicated by definitive engineering or performancedata.

c) Proved reserves must have facilities to process andtransport those reserves to market that are operationalat the time of the estimate, or there is a commitmentor reasonable expectation to install such facilities inthe future.

d) Proved undeveloped reserves are assLgned toundrilled locations that satisfy the followingconditions: (1) the locations are direct offsets towells that have indicated commercial production in theobjective formation, (2) it is reasonably certain thatthe locations are within the known proved productivelimits of the objective formation, (3) the locationsconform to existing weil spacing requlations, ir any,and (4) it is reasonably certain that the locationswill be developed.

e) Reserves that can be produced through theapplication of established improved recovery methods

- 7 - Annex 1. vPage 7 of 27

are included in the proved classification when (1)successful testing by a pilot project or favorableproduction or pressure response of an installed programin that reservoir, or one in thG immediate area withsimilar rock and fluid properties, provides support forthe engineering analysis on which the project orprogram is based and (2) it is reasonably certain theproJect will proceed.

f) Reserves to be recovered by improved recoverymethods that have yet to be established throughrepeated commercially successful applications areincluded in the proved classification only (1) after afavorable production response from subject reservoirfrom either (a) a representative pilot or (b) aninstalled program, where the response provides supportfor the engineering analysis on which the project isbased, and (2) it is reasonably certain the proJectwill proceed.

2. UNPROVED: Unproved reserves are based on geologicand/or engineering data similar to that used in estimatesof prved reserves; but technical, contractual, economic,or regulatory uncertainties preclude such reserves beingclassified as proved. They may be estimated assumingfuture economic conditions different from those prevailingat the time of thie estimate. Estimates of unprovedreserves may be made for internal p4Sanning or specialevaluations, but are not routinely compiled. Unprovedreserves are not to be added to proved reserves because ofdifferent levels of uncertainty. Unproved reserves may bedivided into two subclassifications: probable and possible.Probable reserves are less certain than proved reuerves andcan be estimated with a degree of certaint'r sufficient toindicate they are more likely to be recovered than not, andmay include the following:

a) Reserves anticipated to be proved by normal stepoutdrilling where subsurface control is inadequate toclassify these reserves as proved.

b) reserves in formations that appear to be productivebased on log characteristics but that lack core data ordefinitive tests and which are not analogous toproducing or proved reservoirs in the area.

C) incremental reserves attributable to in:il.drilling that otherwise could be classified as provedbut closer statutory spacing had not been approved atthe time of the estimate.

d) reserves attributable to an improved recovery

- 8 - Annex 1.0Page 8 of 27

method which has been established by repeatedcommercially successful applications when a project orpilot is planned but not in operation and rock, fluid,and reservoir ch&racteristics appear favorable forcommercial application.

e) reserves in an area of a formation that has beenproved product4ve in other areas of the field butsubject area appears to be separated from the provedarea by faulting and the geologic interpretationindicates subJect area is structurally higher than theproved area.

f) reserves attributable to a successful workover,treatment, change of eqLipment, or other mechanicalprocedure where such procedure has not been provedsuccessful .n wells exhibiting similar behavior inanalogous reservoirs.

g) incremental reserves in a proved producingreservoir where an alternate interpretation ofperformance or volumetric data indicates significantlymore reserves than can be classified as proved.

.over the vaars yPF has made diBcov ies nf cru4e o',iind aiatu raigas in numeroui small ±ieia^. Because tne volume ot reserves issmall, these fields have not been developed nor have any surfacefacilities been installed for actual production of these smallfields. YPF has included the calculated reserves volumes from thesesmall fields as proved reserves, but it is most unlikely that thesereserves could be recovered under existing conditions.

8. Reservoir modeling studies perform.. .:i INLAB on the L.oma de .aLata field have resulted in strong indi-..';oans that the volume ofhydrocarbons originally in-situ, and especially the volumes ofnatural gas and condensate liquids that will be recovered at anadequate abandonment pressure to avoid the installation of excesscompressor capacity, will be substantially lower than previouslypredicted. Previous reserve estimations made for Loma de la Latawere based on volumetric calculations and assumptions that theeffective reservoir area covered more of the geological structure.With more recent information from wells defining the productivelimits of the reservoir, and the fact that the reservoir character-istics tend to become very poor as the re.ervoir limits areapproached, it is evident that previous volumetric estimates ofreserves were overlY optimistic. Based on the results from the INLASstudies, the condensate reserves from the Sierras Biancas formationwere adjusted downward by 25,415,000 m3, an¶d the natural gas reserveswere adjusted downward by 112,646 million m3. These adjustmentsfor Lona do la Lata obviously change the entire perspective of thenatural sias availability situation from the Neuquen area.

Annex 1. 0Page 9 of 27

9. The official YPF reserves report for the Ramos field, located inthe Northwest basin and operated by Pluspetrol under a servicecontract with YPF, shows the proved natural gas reserves to be 30,231million m3. This volume is actually the estimated volume to beproduced by the time the service contract expires. The actual provednatural gas reserves are in excess of 75,000 million m3, andconsequently an upward adjustment in proved reserves to this level isjustified.

10. YPF has included all of the offshore Tierra del Fuego reservesdiscovered by Total Petroleum, another service contractor, as provedreserves. The faxt is that Total is just now installing productionfacilities to permit production of a small portion of these reserves,and with the limited capacity of the natural gas trunkline from thatarea,.the production from other fields will be delayed for years. Asa consequence, most of these reserves have been adjusted from provedto probable, since there are no facilities to process and transportthose reserves to market that are operational at this time.

11. In order to obtain hydrocarbon reserves volumes which are morein agreement with the definitions of proved and probable reserves asgenerally understood in the petroleum industry, adjustments were madeto the YPF official reserves report on a field by field basis asconsidered necessary. The details of adjustments in crude oilraszr-fe are siic-a IM TabLes I thru a', aad adJumt=nt. in naaturai 'asreserves are shown in Tables 7 thru 12. The final consequences ofthese adjustments for crude oil and natural gas reserves in Argentinaas from January 1, 198a, are as follhws:

Crudo Oil Official YPF AdjustedReserves M m3 M m3

Proved 357,151 237,082

Probable 188,391 217,925

Natural GasReserves MM m3 Mm m3

Proved 693,3C9 539,253

Probable 163,268 215,221

;4ay 989

- 10 - Annex 1.0Page 10 of 27

Table

YPT - COMPARISON OF OFFICIAL with ADJUSTED OIL RESERVESRemaining Oil Resorves - JanuarY t, 1988

Cuaulative Proved Probabl.Production Reserves Rosorves

thousand m3 thouaaad m3 t?housand m3

OfficialYPF Adm. 416,048 245,353 157,2S3N ntracts J 111I 3t6

Total: 538,281 357.151I t 8391T

AdjustedYPF Ada. 416,048 172,113 163,635Cent-tracts 222.233 64 .9649 5

Total: 63a 2a 2U082a 217,925

- 11 - Annex 1.0Page 11 of 27

Table 2

YPF - ADJUSTED OIL RESERVESAdjusted Remaining Oil Reserves - January 1, 1988

Cumulative Proved ProbableProduction Reserves Reservesthousand .3 thousand .3 thousand d3

NoroesteYPF Adm. 28,695 21,388 15,323Cuntracts 874 12.043 3.819Sub-total: 29,569 J3,431 19,142

CuyanaYPF AdM. 70,538 20,086 3,623Contracts 59.472 8.074 2.777Sub-total: IM7013¶ 28,160 6,400

NeuquinaYLPF Ada. 107,321 82,128 39,224Contractu 48.98i 11.i9 3.0933ub-total: 156,30S 93,219 42,317

Sa'n Jorge (L)

YPF Ada. 180,162 38,463 87,710Contracts 112.9Q] .;4101Sub-total: 293.06S 62,564 88,016

San Jorge (CC).YPF Ads. 24 0 8,285Contracts °Sub-total: 24 0 8,285

Austral (L)YPF Adm. 29,308 :!0.048 6,054Contracts. a a ,Sub-total: 29,308 10,048 6,054

Austral (S)YPF Ada. 3 O 3,416Contracts a 2.Lo60 44.295Sub-total: a 9,660 47,711

Total Oil Reser.Total YPF Ada. 416.048 1i2,113 163,635Total Contract 222.233 54.969 54.290Grand .aota;: 638.28! 237,082 217,925

'LL) land (S3) sea (CC) coadtal bait

12 - Annex 1.O.Page 1t of 27

Table 3

YPF - OIL RESERVES ADJUSTMENTS(as from January 1, 1988)

Cumulative Proved ProbableProduction Reserves Reserves

thousand W3 thousand m3 thousand m3

NoroesteOfficial 28,695 21,469 ISS92Adjustment -a1 -26LAdJ. reserves 28,695 21,388 15)323

CuyanaOfficial 70,538 21,457 3,627Adjustment -1 371 -4AdJ. reserves 70,538 20,086 3,623

Neuquinaofficial 107,321 123,772 40,053Adjustment -4t.644 -82AdJ. reserves 107,321 82,128 39,224

San Jorge (L)Official 180,16? S1,388 87,710Adjustment - 1L925 OAdj. reserves 180,162 38,463 87,710

San Jorge (CC)Official 24 8, 2as 0Adjustment -8285 8L215Adj. reserves 24 0 8,28S

Austral (L)Official 29,308 11,004 6,857Adjustment -9-6 -803Adj. reserves 29,308 10.048 6,054

Austral (S)Official 0 7,978 3,416Adjustment -7.978 0Adi. reserves 0 0 3,416

Total official: 416,048 245,353 157,255Total adjustment: -_3_240 _.___

Totai adi. reserves: 416.3.48 I7Z.113 '3,5*35

(L) land (8) sea (CC) coastal belt

- 13 - Annex 1.0Page 13 of 27

taSi 4

ADJUSTMENTS - YPF OIL RESERVES(as from January 1. 1988)

Proved ProbableReserves Reserves

thousand m3 thousand m3

NoroesteLa Tiqra - not prod -46 -269Agua Blanca - not prod -35 -26Sub-total: ^8 -269

CuyanaCarrizal - conditional -670 aPuesto Rojas - conditin -700 0Los Tordillos -net prod -1 -4

Sub-total: -1,371 -4

tNeuquinaC. 9oleadero - not prod -20 0

C.Fortunoso E.-not pro -2 0

C. Mollar O.-not prod -32 -141

El Sosneado N.-not prod -74 -262

La Buitrera - not prod -2 -3aLoma Peladas E.-not prd -20 0

Rincon Amarillo-not prd -2 0

Paso Bardas - not prod -15 0Cerrito 0.-not prod -1 -35

Loma La Lata SB-reduce -25,415 0

Loma Neqra - not prod -5 0

Mangrullo - not prod -6 aSenillosa - not prod -56 -353

aartolo N.- not prod -4 0

Divis.Catriel-not prod -2 0

Pta. RosadaS.-not prod -6 0

Aguada Toledo- conditio -1 ,074 0

p.iHernandez - condition -4,481 0

P. Malina - conditional -362 0A.del Cajon-conditional -457 0Ag.Toledo -conditional -1,918 0

P.molina -conditional -865 0

Ag.Baquales-conditional -240 0Hedanito O.-conditional -6,585ub-total: -41 ,44 -A29

Annex 1.0-14 - Page 14 of 27

.abla 4 cont'd

ADJUSTMENTIS - YPF OIL RESERVES(as from January 1, 1989)


thousand m3 thousand .3

San JorgeCpo.Central D(EII)-cond -215 0Tordillo N.-conditionai -136 '3z.Central S(EI)-conditi -140 0Cdon. Leon aXInb-condit -660 0P.Truncado - conditiona -83 0C.Central -conditional -3,826 0El Trhbol-8.Vista-condi -1,100 0EL Tordillo-conditiOnal -3,753 0Escalante-conditional -1.420 0Cdon. Leon-conditional -1.1S2 aEl Dest.no-conditional -1 aP. Truncado-conditiOnal 37 Sub-total: -12,925

San Jorge (CC)Cinturrin Costero-not pr -8 285 8.285Sub-total:

Austral )L)Campo Bola-not prod -89 '3C. aolleadoras- prod -14 -23Cdon. Salto-not prod -15 n

C. Salto O.-not prod -8 -12Cerro Norte-not prod -1 -94C. Suen Tiempo-not prod -9 -50Filomena-not prod -30 2Guanaco Muerto-not prod -7 0Las Buitreras-not prod -11 GLa Carmen-not prod -8 -26La Leona-not prod -13 a2La Marchand-not prod -14 0Lag. El Palo-not prod -97 -257.a aehueicne-not prod -28 -. 7La Terraza-not prod -7 -51Puesto Quince-not prod 37 -95S. Cristobas-not prod -8 0Cerro Mesa-not prod -5 -:;aoEl Monte-not prod -6 2

Annex 1.0- 15 - Page 15 of 27

Table 4 cont'd

ADJUSTHNTS - YPF OIL RESEP.VES(as tram January 1, 1988)


:housand m3 thousana me

L. Flamenc/Fe-not prod -20 -20La Sara -ozndiUtional -206 0Cdon. Salto-conditional -!95 aLa Sara - conditional -83 eSub-tOtal: -356 -8.3

Austral (5)Magallanes-not prod -7.927 *sub-total: -7,978 a

Tatal Adjustment: -73.240 6,380

(L, land (S) sea(CC) coastal belt

- 16 - Annex 1.0

T a Page 16 of 27

CONTRACT OIL RESERVES ADJUSTMTS(as from January 1, 1988)

Cumulative Proved ProbableProduction Reserves Reserves

thousand a3 thousand m3 thousand 23

NoroestsOfficial 874 4,856 1,540Adjusted 7.187 2.279Adj. reserves 874 2,043 3,819

CuyanaOfficial 59,472 10, 194 2,777Adjusted -2.120 0Adj. reserves 59,472 8,074 2,777

N uquinaofficial 48,984 23,842 3,093Adjusted -12.751 0Adj. reserves 48,984 11,091 3,093

San JorneOfficial 112,903 42.371 306Adjusted _ -18,270 aAdJ. reserves 112,903 24,101 306

Austral (S)Official 0 30,535 23,420Adjusted -20.875 20.975Adj. reserves 0 ,,295

Total official: 222,233 111t,798 31,136Total adjustment: -46.829 23.134Total adj. reserves: 2 64,969 54,29

- 17 - Annex 1. 0Page 17 of 27

ADJU8TMNTS - COWIRACT OIL RESERVWS(as from January 1, 1988)

Proved ProbablsReservre Reserves

thousand m3 thousand m3

NoraostaRamos 7.187 2.279sub-total: 7 187 2.279

CuymaaRefugioTupungato-condit -2 0

P. CoLoradas-conditioa -2.118 0sub-total: 120 o

Nluqcaunlo-uecooUic -4,388 0Anticlin, cap.-conditi -1,028 0centenrio-conditional -1, 906 0

Catriel Oeste-condition -21 amedianera-conditional -i, 158 0

M4danito SE-conditional -4.250 0Sub-total: -12,751 J

san Jorge (LiAmoco-conditional -4,828 om4anan.fhr-conditional -2,463 0Cdon.-Sco-conditional -2,312 0m4eseta Espin.-condition -6,717 0F.] Cordon-conditional -1 ,571 0

Piedra Clavada-conditio 397 0Koluel Daike-canditiona -776Sub-total: -18,270 3

Austral (S)Ara - not prod -49? 4.j7Ara (Oi8) - not prod -'03 t03Argo C - not prod -700 100Argo P - not prod -s.4o0 5,400Aries C - not prod -1,000 1,000Aries P - not prod -1,700 1.700Carina C - not prod -oa0 300Klaus P - not prod -1 ,000 i .0oLobo C not prod -300 300t.obo P - not prod -1,100 1,a?oius C - aot prod -25 ziVega C - not prod -355a 5_Vega-Pleyade - not prod -'.600 7,

sub-total: -20 ZO,8720

Total Adjustment: -46,829 23,154

18 - Annex 1.0Page 18-of 27

Table 7

YPF - COMPARISON OF OFFICIAL with ADJUSTED GAS RESERVESRemaining Natural Gas Reserves - January 1, 1988

Cumulative Proved Proved ProbableProduction Free Gas Dissol.Gas Gas reser.million m3 million m3 million a3 -million m3

NATUR}AL GAS

OfficialYPF Adm. 254,823 524,687 39,428 l03,648Contracts S7.145 119.210 10.064 59.6l0Total: 311,968 643,897 49,492 163,268

AdJustedYPF Adm. 254,823 401,038 37,5os 106.801Contracts 57.145 93.379 7.786 108.420Total: 311,968 494,417 44,836 215,221

- 19 - Annex 1.0Page 19-of 27

Table 8

YPF - ADJUSTED NATURAL GAS RESERVESAdjusted Remaining Natural Gas Reserves - January 1, 1988

Cumulative Proved Proved ProbableProduction Free Gas Dissol.Gas Gas reser.million m3 million m3 million m3 million m3

NoroesteYPF Ada. 47,933 68,916 1,243 27,229Contracts 5.212 75.278 16.800Sub-total: 53,145 144,194 1,243 44,029

cuyanaYPF Adm. 1,831 0 1,657 0Contracts 02.355 238 0Sub-total: 4,186 a 1T950

NeuquinaYPF Ada. 69,SO4 268,873 19,875 48,904Contracts 37,50Q 5fju 5.748 6.138Sub-total: 107,004 28S,386 2S,623 55,042

San JorgeYPF Ada. 60,491 12,117 9,129 2,976Contracts 12.078 1.588 1.270 102Sub-total: 72,569 13,705 10,399 3,

Austral (L)YPF Adm. 75,064 51,132 S,146 27,692Contracts O O a Sub-total: 75,064 51,132 5,146 27,692

Austral (S)YPF Adm. 0 0 0 0Contracts 530 85.38QSub-total: .0 0 530 8s,380

Total Gas Reser.Total YPF Adm. 254,823 401,038 37,050 106,801Total Contract 57,145 93.379 7.786 108.420Grand total: 311,968 494,417 44,836 215,221

- 20 - Annex 1.0Page 20 of 27

Table 9

YPF - GAS RESERVES ADJUSTMENTS(as from January 1, 1988)

Free Gas Dissolved ProbableCumul. Prod. Proved Proved Gasmillion m3 million m3 million m3 million m3

NoroesteOfficial 47,933 68,971 1,293 27,229Adjustment -_s _ -50 .AdJ. reserves 47,933 68,916 1,243 27,229

CuyanaOfficial 1,831 0 1,657 0Adjustment - Q 0Adj. reserves 1,831 a 1,657 0

NeuquinaOfficial 69,504 386,008 20,132 46.137Adjustment -117.135 -2S7 2.767Adi. reserves 69,504 268,873 19,875 48,904

San JorgeOfficial 60,491 12,117 9,129 2,976AdJustment - , °AdJ. reserves 60,491 12,117 9,129 2,976

Austral (L)Official 75,064 57,182 5,221 22,372Adjustment -6.00Q -75 5.320Adj. reserves 75,064 51,132 5,146 27,X92

Austral (3)Official 0 409 1,996 4,934Adjustment -409 -1,996 -4 934AdJ. reserves 0 0 0

Total official: 254,823 524,687 39,428 103,648Total adjustment: -123.649 -2.378 3.153Total adJ. reserves: 2s4,823 401,038 37,050 106,801

- 21 - Annex 1.0Page 21 of 27

Table 10

ADJUSTMENTS - YPF GAS RESERVES(as from January 1, 1988)

Free Gas Dissol. Gas ProbableProved Proved Gas

million m3 million m3 million m3

NoroesteLa Tigra - not prod 0 -49 oAgua Blance - not prod -1 0Sub-total: Ss -Z O

NeuquinaC. Boleadero - not prod -322 0 322C. Fortunoso E.-not pro -67 0 aC. Mollar 0. - not prod 0 -16 0El Sosneado N. - not pr 0 -1g 0OLa Buitrera - not prod 0 -1 0Lama Espinas - not prod -24 -12 0Loma Peladas E.- not pr -781 0 781Puesto Adobe - not prod -43 -S -99P.A.Calientes- not prod 0 -S9Rincon Amarillo- not pr -22 0 -273Paso Bardas --not prod -1,036 0 1,036Paso Bardas N.- not pro -52 0 52Cerro Vagon - not prod 0 -1S 0Cerrito Oeste - not pro -1 a -192F.de Piedra - not prod -23 0 -123Loma La Lata SB-roduce -112,646 0 0Mangrullo - not prod -510 0 510Pto. Opazo - not prod -14 -5 -147P'ta.Senillosa- not prod -150 -3 -190Senillosa - not prod -185 -35 0Barr. Loroa N.-not prod 0 -70 oBartolo N. - not prod -45 0 aBlanco Olivos- not prod -480 -1 4aoDivis. Catriel - not pr -60 0 -50Puesto Silva - not prod -14 -16 0Pta. Rosada - not prod -660 0 660Sub-total: -117,135 -257 2,767

San JorgeSub-total:

- 22 - Annex 1.0Page 22 of 27

Table 10 cont'd

ADJUSTMENTS - YPF GAS RESERVES(as from January 1, 1988)

Free Gas Dissol. Gas krobableProved Proved Gas


Austral (L)C. Boleadoras- not prod -2,170 0 2,170Cdon. salto O.-not prod 0 -2 0Cerro Norte - not prod -644 0 644C.Buen "iempo- not prod 0 -13 0Chorrillos N.- not prod 0 -6 0Filome.a - not prod -562 -14 562Guanaco Muerto-not prod -103 0 103Las Buitraras - not pro -280 0 0La Carmen - not prod -179 -1 179La Leona - not prod -337 0 337Le Marchand - not prod -339 0 339Lag.El Palo - not prod 0 -7 0La Tehuelche - not prod 0 -5 0La Terraza - not prod -77 -2 aArroyo Cachimba-not pro 0 -4 0Castillo O.- not prod 0 -1 0Puesto Quince - not pro 0 -18 0S.Criatobal - not prod -180 0 -193El Monte - not prod -138 0 '38L. Flamenc/E - not prod -1,041 0 1,041Rio Chico N.- not prod 0 -2 0Sub-total: -6,050 -75 5,320

Austral (8)M4agallanes - not prod -409 -1.996 -4.934Sub-total: -409 -1.996 -4,934

Total adjustment: -123,649 -2,378 3,153

- 23 - Annex 1.0Page 23 of 29

Table 1t

CONTTRACT GAS RESERVES ADJUSTMENTS(as from January 1, 1988)

Frea Gas Dissol. Gas ProbableAccum. Prod. Proved Proved Gas Reservedmillion m3 million m3 million m3 Million m3

Noroesteofficial 5,212 30,509 0 6,,780adjustment 4,769 IG.020adj. reserves S,212 75,278 .0 16,800

Cuyanaofficial 2,355 0 238adjusument - 238adj. reserves 2,355 0 238

Nouquinaofficial 37,500 16,S13 S,786 6,138adjustment ° -38 0adj. reserves 37,500 16,513 5,748 6,138

san Jorge (L)official 12,078 1,588 1,270 102adjustment 0 a . °adj. reserves 12,078 1,588 1.270 102

Austral (8)official 0 70,600 2,770 46,600adjustment -70.600 -2.240 38.780adj. reserves 0 0 530 85,380

Total official 57,145 119,210 10.,064 59,620Total adjustment 0 -25.a31 -2.27a a48.800Total adi. reserves 57,145 93,379 7,786 10a,420

Annex 1.0-24 - Page 24 of 27

Table 12

ADJUSTMENTS - CONTRACT GAS PESERVES(as from JanUarY 1, 1988)

Free Gas DissolWi' ProbableProved Proved Gas Reserves


Noroest4Ramos 44.769 0 10.020Sub-total: 44,769 0 10,020

Cuyanaaub-total: 0 0 0

NeuquinaLlancanelo -unecon. 0 -38 0Sub-total: -38 0

San Jorge (L)Sub-tp%tal: 0 0 0

Austral (8)Ara C - not prod. -10,000 -100 10,100Argo P - not prod. -6,300 -400 6,700Aries C - not prod. -10,500 -100 10,600Carina C - not prod. -29,000 -1,100 0Klaus P - not prod. 0 -40 0Lobo C - not prod. -3,800 -120 0Vega-Pleyade P-not prod -11.000 -380 11,380Sub-total: -70,600 -2,240 38,780

Total adjustment: -25,831 -2,278 48,800

!

- 25 - Annex 1.0Page 25 of 27

Comments Pertaining to Official Crude Oil and Natural Gas Reservesas at 1/1/89

With a crude oil production volume of 25,539 MCM during 1988,and an increase in official proved crude oil reserves of 5,319 MCMas at 01/01,'89 as shown in Table __, the total volume of officialproved crude oil reserves added during the year 1988 amounted to30,858 MCM. Of this total volume added, 77% resulted from reviewand studies of known reservoirs, 20% from development of knownreservoirs, and 3% (926 MCM) from exploration. Official probablecrude oil reserves were also increased during 1988 by 26,664 MCM,all of which resulted from the San Jorge and Austral basins. Ofthis total volume of official probable reserves added, 47%resulted from review and studies of known reservoirs, 7% fromdevelopment of known reservoirs, and 45% (11,999 MCM) fromexploration. The volume of official proved secondary recoverycrude oil reserves, which is included in the total volume ofofficial proved crude oil reserves of 362,470 MCM as at 01/01/89,was reduced by 29,180 MCM during 1988, implying correctiveadjustments to those official proved crude oil reserves previouslyclassified as 'condicionada-. It was not possible to makeadjustments to the official reserves as at 01/01/89 becausedetails for each field and the "condicionada" reserves volumes-have not been made available.

With a natural gas production volume of 22,700 MMCM during1988, and an increase in official proved natural gas reserves of79,623 MMCM - the total volume of officialproved natural gas reserves added during the year 1988 amounted to102,323 MMCM. All of this total volume added resulted from reviewand studies or further development of known reservoirs. Of thenet official proved natural gas reserves increase of 79,623 MMCMas at 01/01/89, 62% was from known fields in the Northwest basin,and 22% was from known fields in the Austral basin. The netincrease in proved natural gas reserves in the Neuquin basin,where spare capacity in trunklines is available, amounted to only5% of the total. Official probable natural gas reserves werereduced during 1988 by 36,046 MMCM; this volume was incorporatedinto the total net increase in official proved natural gasreserves. From the information available, it is not possible tomake a specific evaluation of the results from exploration, butfrom all indications, exploration contributed very little to thenatural gas reserves situation during 1988. Without detailed datafor each field and the *condicionada' reserves, it is not possibleto make adjustments for the official natural gas reserves as at01/01/89.

- 26 - Annex 1. 0Page 26 of 27

ARGENTINA - COMPARISON OF OFFICIAL NATURAL GAS RESERVES VOLUMES(Official reserves as at '/1,'88 & 11/'89 - without adjustments)

Free Gas Dissolved ProbableProved Provad Gas


NoroesteOfficial 1/1/88 99,480 1,293 34,009Official 1/1/89 148.794 960 0Net change, + or - 49.314 -333 -34,009

CuyanaOfficial 1,'1/88 0 1,895 0Official 1/1,'89 0 t.290 aNet change, + or - G -605 0

Neys2inaofficial 1/1/88 402,521 25,918 52,275Official 1/'1 /89 405 020 27 765 51,083Net change, + or - 499-1,192

San JoraeOfficial 1/1/88 13,705 10.399 3,078Official 1/1/89 't,633 22.075 4,659Net change, + or - -2,072 11,676 1,5819

AustralOfficial 1/'1,'88 128,191 9,987 73,906Official ,'11/89 147 271 8.204 71.480Net change, + or - 19,080 -1,783 -2,426

TotalOfficial 1/,1/88 643,897 49,492 163,268Official 1/1/89 742.718 60.294 127,222Net change, t or - 68,821 10,8027 -361,046

(1) Natural gas production during 1988 was 22,700million m3.

(2) Most of the increase in proved natural gas res-erves resulted from Aguarague and Ramos conden-sate fields in the Northwest Basin.

(3) Adjustments have not been made to these officialnatural gas reserves 0 1/1/89 because detailsfor each field and those "condicionada" reservesvolumes have not been made available.

- 27 - Annex 1.0Page 27 of 27

ARGENTINA - COMPARISON OF OFFICIAL CRUDE OIL RESERVES VOLUMES(Official reserves as at 1/1/88 & 1/1/89 - without adjustments)


thousand m3 thousand m3-- -- - -- --- …- -

NoroesteOfficial 1r/1/88 26,325 17,132Officiai 1fl'/89 33.694l 1.516Net change, + or - 7,369 -15,616

Official 1/1/88 31,651 6,404Official 1/1,'89 37.234 ".301Net change, + or - 5,583 -5,103

NeuquinaOfficial 1/1/88 147,614 43,146Official 1/1/89 147,540 35.851Net change, t or - -74 -7,295

San JorgeOfficial 1/1/88 102,044 88,016Official 1/1/89 _966,96 119.040Net change, + or - -5,348 31,024

AustralOfficial 1/1/88 49,517 33,693Official 1,'1/89 47.306 57.347Net change, + or - -2,211 23,654

TotalOfficial 1/1/88 357,151 188,391Official 1/1/89 362.470 215.0.5Net change, + or - 5,319 26,664

(1) Crude oil production during 1988 was 25,539thousand m3.

(2) Most of the increase in proved crude oilreserves resulted from previous probablereserves. San Jorge and Austral probablereserves increased significantly.

(3) Adjustments have not been made to the officialzrude oil reserves Q 1/1/89 because detailsby fieeld and *condicionada not available.

28 - Annex 1. 1Page 1 of 10

RGENWTNA

INSTITUTIONAL STRUCTURE OF THE HYDROCARBON SUSSECTOR

1. The institutional framework in Argentina for the development andimplementation of policies pertaining to the local hydrocarbonsindustry, for strategic planning affecting this industry, and for themanagement and operation of th. hydrocarbons energy subsector, ischaracterized by five distinct levels of decision-making: (1) theExecutive Power (PE) represented by the President of the nation; (2)an executive level represented by the Ministry of Economy (HE) andthe Ministry of Public Works and Services (MOOP): (3) a superiormfanaqment level represented by the Directorate of Public Enterprise.(DEP (4) a regulatory and planning level represented by theSecretariat of Energy; and (5) an implementation 2nJ operationallevel represented by the State-owned companies (PEs), YacimientosPetroliferos Fiscales (YPF), and Gas del Estado (GdE).

The Exeutive Power (PMN1

2. The PEN exercises the highest position of authority to influencethe appointment of top-level personne in the State-owned energycompanies, and among other responsibilities, gives final approval toall contracts with private companies for exploration, production,transportation, processing, export/import, and/or sales ofhydrocarbons and their derived products.

The Ministry of EconomY (ME)

3. The ME, either directly or with intervention of the Secretariatof the Treasury (8R), participates in setting prices and taxation onall crude oil, natural gas and liquid products, and in establishingthe amounts of royalty payments to those provinces from whichhydrocarbons are produced. All contracts that require final approvalfrom the PEN, are first subject to approval by the ME. Guidelinesfor limits of annual budgets of expenditures and investments for thePEs are established by the ME, and subsequent adiustments in budgetamounts of PEs are made from time to time by the ME. In addition toother responsibilities, the HE reviews non-economic objectives/con-straints assigned to PEs, approves subsidies or compensation fornon-economic objectives assigned to PEs, and approves investments anddebt servicing requirinq budget transfers or Government guarantees anforeign loans.

The Ministrv of Public Works and Services (MOSP)

4. The MO8P is the formal liaison between the onergy sector and thePEN; the minister is a member of the cabinet and a spokesman for the

- 29 - Annex 1.1rage 2 of 10

energy sector at this decision level. Since all petroleum andnatural gas resources in Ar;entina are the exclusive property of thenation, with exception of certain small private concessions whichexisted prior to the ostablishment of the Law of Hydrocarbons, theMOSP is the principal overseer of the hydrocarbons subsector. Withinthis role, the HOSP approves most contracts, annual budgets, keypersonel changes, and issues numerous regulations that affect thepetroleum and natural gas subsectors. TU MOSP also makes decisionsregarding divestitures and privatizations, prepares related draftlegislation for the Congress, and arbitrates any disputes between DEPand the Secretariats.

30 - Annex 1.1Page 3 of 10

The Secretariat of Energy (SE)

6. The Law of Hydrocarbons, No. 17,319, designated the SE as theApplication Authority for all technical aspects related to theproduction, processing and marketing of petroleum and natural gas inArgentina. Since 1985, certain other functions, previously reservedfor Ministry level, were delegated to the SE, such as setting finalofficial prices for all commercialization of crude oil, natural gas,and liquid products. These official prices are set by the SE afterconsulting with and subject to the approval by the ME and MOSP inconsideration of the economic consequences and the large tax revenuethat is generated. The PEs and all private companies involved withproduction, transportation, processing, and/or marketing ofhydrocarbons are thus dependent upon the SE for all of their pricesand profit margins for marketing functions (with exception of servicecontractors with prices established iny contracts). Other specificfunctions performed by the SE are as follows:

- Energy sector planninq

- Approval and enforcement of contracts between the State and/orPES and private companies engaged in the hydrocarbons industry

- Distribution of crude oil among the various publicand private refineries (both quality and quantity)

- Authorizations for importation/exportation of hydrocarbons

- Locations for retail service stations

- Margins for refining, commercialization and service stationsales of petroleum products

- Allocation of financial resources to the different energysubsectors

- Energy conservation

- Development new sources of energy

- Coordination of the activities of the diverse companiesoperating within the energy sector

7. The SE, functioning as a Secretariat under the MOSP, is directedb;. & designated Energy Secretary. This orgaaization includes foursubsecretariats: (1) Fuels, responsible for the supervision of thethree state owneu companies dealing with fuels, YPF, GdE, and YCF,and other private concession producers, refining and marketingcompanies; (2) Electricity, responsible for controlling fourprincipal electricity generating companies; (3) Planning, responsiblefor energy planning, conservation, efficiency improvements in PEs,

- 31 - Annex 1 .1Page 4 of 10

loss reductions, and development of new energy sources; and (4)Relations with Enterprises, responsible for coordination andevaluation of the companies participating in the hydrocarbonsindustry, and also providing liaison with agencies and organizationsoultside of the energy sector.

8. The BE is small in size, with some 15 professional employees,including the Energy Secretary and the four undersecretaries. Notonly does this small group formulate policies, but they also producelong-range plans, revise budgets, assist in the allocation offinancial resources, coordinate inter-coWpany activities, and try toestablish relative priorities for energy use. They do not have atechnical staff which is qualified to perform all of the functionsnecessary for decision-making. They do not have an Cxperienced groupcf technical inspectors/evaluators with which to maintain vigilanceover the actions of the PEs and private companies participating inthe energy sector. The SE, under certain conditions, authorizesselected personnel within the PEs to exercise these regulatorycontrol functions, responsibilities which should be done by and withits own pdrsonnel. At times, the SE is obligated to reinforce itsown staff with technical or administrative personnel from the PEs,designated to work "on commission". These staffing deficiencies onlyconspire to result in less than adequate performance of the veryimportant functions that are designated to the SE and contribute toconfusion between activities that should be performed only by theState with those that should be strictly the responsibility of thMPEs. In spite of these limitations, the implementation of politicaldecisions pertaining to the energy sector by the Government a:ecorrectly channeled through the SE, which also provides input andparticipates in the formulation of these decisions. The actualresults, many times, depend oan the personality of the individualdesignated as Energy Secretary at that particular time.

Yacimientos Petroliferos Fiscales (YPF)

9. - YPF is a State corporation (emprosa del estado), having acorporate structure similar to a private corporation, but the onlyshareholder is the Government represented by DEP. With thetransformation to this corporate structure in April 1977, theexpressed intention was to provide an organization that would be incondition to act with fluidity of decisions and attain the level ofefficiency and asility comparable to a private corporation. At thesame time that YPF was provided with a corporate structure that wouldsupposedly contribute to improved agility of operation, the Stateguaranteed its absolute predominance in the management and control ofYZPF. As might be expected. only the latter objective was realized.

10. The Law of Hydrocarbons, No. 17,319 (1967) states, "Theactivities pertaining to the exploration, exploitation, industriali-zation, transport and commercialization of hydrocarbons will beperformed by State companies, private companies or mixed companies in

- 32 - Annex 1.1

Page 5 of 10

conformance with the dispositions of this Law and the regulationsthat the PEN decrees". The statutes of YPF, dated July 31, 1987,state the objective of YPF to be ".... to implement the Argentinepetroleum policies and will have as its role the study, theexploration for and exploitation of liquid or gaseous hydrocarbonreservoirs, as well as the industrialization, transport andcommercialization of these products and their direct and indirectderiviatives to which effect it can produce them, buy them, sellthem, trade them. import or export them and realize whatever othercomplimentary oparation of their industrial and commercial activity.For the better fullfilment of these objectives, it can promote theformation of official entities and establish, associate orparticipate in private corporations, State corporations, corporationswith maJority of State participation, or of whatever other legalframework". In actual practice, YPF controls all exploration andproduction of hydrocarbons in Argentina, with exception of certainsmall old concession areas, and YPF also controls the majority ofrefining and marketing activities. Excluding the small concessionareas, all private companies, both local and international., whichparticipate in the exploration for or production of hydrocarbonsperform their activities under a service contract with YPF.

11. YPF was established in 1922, making it one of the oldest Stateoil companies in Latin America. For its own account, YPF producesabout 70% of all crude oil production and more than 8OX of all gasproduction, and maintains supervisory contrcl over the privatecompany service contractors who produce the remainder. Although YPFis structured as a corporation, its main function is to produce alarge amount of revenue for the Government. YPF currently generatesabout US$7 billion per year (including fuels taxes) in grossrevenues.

12. YPF is undergoing a basic reorganization program, with theobjective of defining the general structure, the nature and atributesof each principal corporate unit, and the relations of subordination,coordination and control inherent to these units. The Board ofDirectors of YPF (BOD) is the maximum level of administration anddirection within the corporation. The BOD consists of a President,an Executive Vice-President, and from one to five Directorsdesignated to serve fer three years. In addition to being the lesalrepresentative of the corporation and presiding over the BOD, thePresident is charged with the direct supervision over the followingunits of the organization:

- Foreign Relations- Auditing- Center of Investigation and Development- General Security- General Secretary- National Defense- Civil Engineering

- 33- Annex 1.1Page 6 of 10

13. The Executive Vice-President of YPF, as the vxecutive officer,is charged with implementing the directives and !.upervising thecompliance with rules amanating from the BOD, and administering theresources of the corporation, within the Laws, statutes and accordingto corporate plans. In addition to other responsibilities, theExecutive Vice-President supervises directly the following organiza-tion functional units:

- Exploration and Exploitation- Industrialization- Commercialization- Maritime and River transport- General Planning- Legal Assistance- Administration and Finance- Industrial Relations- Purchasing and Supply

14. Under the direct supervision of the Executive Vice-President,the four operating divisions and their respective missions are statedto be as follows:

A. Exploration and Exploitation:Manage the exploration, drilling, and production of crude

oil and natural gas, and to decide on the-conditions of sale,under business principals, that will ensure the profitability ofthis division, in accord with the corporate statutes, the plansand programs and all other regulatory norms.

S. Industrialization:Manage the industrialization of hydrocarbons and their

transportation via pipelines at minimum costs and according tothe preestablished quantities and qualities, and to decide onthe conditions of purchase-sale of these, under businessprincipals, that will ensure the profitability of this division,in accord with the corporate statutes, the plans and programsand all other regulatory norms.

C. Commercialization:Manage the commercialization of hydrocarbons, under business

principals, that will ensure the profitability of this division,in accord with the corporate statutes, the plans and programsand all other regulatory norms.

0. Maritime and River Transport:Manage the activities of maritime and river transport of

crude oil and its derivatives, under business principals, thatwill ensure the profitability of this division, in accord withthe corporate statutes, the plans and programs and all otherregulatory norms.

1S. All administrative functions of YPF are being organized into

- 34. 34 - Annex 1.1Page 7 of 10

specialized "Central Units". These Central Units will assist topmanagement and all other operating units of the corporation. EachCentral Unit is responsible for planning, advising and regulatingmatters that come within its specialization, even though theimplementation of that activity is not subordinated to its formalor organizational authority. In addition to these responsibilities,the Central Units, within their respective specializations, willcarry-out the activities required of their cenzralized functions, asfollows:

A. General Planning:Plan the operating, economic and financial acti-ities of the

corporation. Propose the organization and norms oriented tothe necessities of the corporate functions. Coordinate theactivities of data processing, information systems andcommunications. -

S. Legal Advice: Oversee all legal matters. and advise,represent and regulate for all of the areas in legal matters,intervening when necessary in those acts that might compromisethe assets of the corporation.

C. Administration and Finances:Exercise the functional suwervision of accounting and

financial activities of the corporation in a manner that wiilpermit a measure of the results from financial operations by thecorporation.

D. Industrial relations:Propose, advise and regulate the policies of the corporation

in matters of personnel, industrial security and labor rela-tions. Manage, advise and regulate matters regarding socialservices. Coordinate the development of company policies.

E. Purchasing and Supply:Propose, advise and regulate the policies of the corporation

in matters concerning purchases and warehousing. Assist thedifferent Purchasing Units of the corporation in terms ofprocedures and conditions of contracting.

F. Center of Investigation and DevelopmentEncourage and realize efforts of investigation and develop-

ment of techno'.ogies for the petroleum industry and otheractivities of the corporations. Manage and provide internalservices and to third parties, under business principals thatwiil ensure profitabil-ity.

G. General Secretary:Comply with the activities conducive to normal functioning

of the Stockholders Meetings and activities of the BOD; regulateand coordinate the entrance controls of the corporation at itsheadquarters building.

35 - Annex 1.1Page'8 of 10

H. National Defense:Comply with the activities of National Defense imposed cn

the corporation by legialation and the norms and directivesissued by the defense authorities.

r. Auditing:Audit the compliance of norms and procedures vithin the

corporation, covering technical-operating, economic-financialand legal, operating above the Internal Control and informingthe BOD of any deficiencies detected.

J. General Security:Direct and oparate the protection of assets of the

corporation, in order to ensure a normal functioning ofactivities without interference or perturbanceso plan, regulateand direct the tasks of prevention of security lapses.

K. External Relations: Plan, implement, and coordinate therelations of representatives of the corporation with thecommunity and its inscitutions.

L. Civl Engineering:Convene with other areas regarding projects within this

specialization whenever these areas cannot adequately designtheir technical projects. Encourage the development of gooddesign and engineering tecbniques and assist other corporateareas in these matters.

Gag del Estado (GdE)

16. GdE was established in 1946 as a Government enterprise toprovide natural gas distribution services as a public service. In1978, GdE's statutes were amended to the effect that it would operateas a State Corporation, and its fundamental objective was stated tobe the provision of gas as a public service, rather than economicconsiderations. GdE purchases natural gas from YPF in producingareas located primarily in the provinces of Neuquen, Chubut, SantaCruz, Rio Negro, Salta, and the National Territory of Tierra delFuego. Imported gas is also received from Bolivia. From theproducing areas, GdE processes the natural gas to remove hydrates andheavier liquids, and then transports the natural gas to consumingcenters from where it is distributed to the individual end-users. Inaddition to the sales of natural gas, GdE also produces and marketsLPG (propane and butane) and subproducts such as ethane and naturalgasoline.

17. The head office of GdE is located in Buenos Aires, where thecorporation also maintains 5 branches and 1 matece facility. in17 provinces and in Tierra del Fuego, GdE has 101 branches, 6maintenance facilities, and 3 agencies. dE employs soms 10,000

36 - Annex 1.1

Page 9 of 10

people. During 1986, GdE supplied an average of 39 million m3 perday of natural gas to end-users and produced gross revenues of nearUS$1.0 billion. odE is basically a transporter of natural gas ratherthan transforming natural gas into other products. The company doesnot participate in residential repair of natural gas burning devices.

18. The organization of OdE at the top level of authority comprisesa Board of Directors, the President, the Vice-president, and theGeneral Manager. In practice, even though the directors do not havespecific areas of assigned responsibility, they do perform importantexecutive responsibilities. The President exercises the maximumresponsibility, especially with regard to relations with otherGovernment agencies in matters such as tariffs, investments,financing, etc. in which GdE does not have autonomy. TheVice-president also exercises the function of the General Manager,and as such is the maximum authority within the corporation; heprovides the connection between the Board of Directors and careeroperating managers.

19. From the General Manager depend 4 General Submanagers: (I)Technical-Operating, (2)Commercial. (3)Plaznning and DeveLopment, and(4) Administration. Under these Submanagers are a DepartmentalManagers, but there are in addition 5 other D*partmental Managersthat depend dirsctly upon the superior authorities.

20.

Formally, other agencies who areinvolved include t ; 8E, the HE. the MOSP, the SR, and theSindicatura de Emprsas Publicas. Informally, the palitical connec-tions of the Directors and certain other high-level manageMentpersonnel create divergent relations with strong power groups, suchas other State Secretariats. provincial Governors, congresssen,political bosses, private companies, etc. Consequently, even thoughZormal authority is concentrated in the Vice-pr.694dent and GeneralManager, the many informal relatiosl create superpositions of linesof decision direct to the General Submanagers, resulting in mostimportant decisions that affect the economic condition of GdE beingtaken outside ox GdE and without the adequate participation ofindividuals who are experienced iL the matters under consideration.At the same time requests for all types of urgent information fromnumerous Government agencies impose requireaumts on the time and

activities of the Directors and other managers, creating confusionand dilution of the official strategic program or other directivesfor the corporation. This situation is not unique only to GdE, butit also exists in most other state companies; it results basicallyfrom adopting the corporate form resembling private corporations,but without Directors who h.&ve the career experience and dedicationto "their" corpozation. Being a State corporation, with a number ofDirectors, only contributes to the multiPle lines of dependence thatextend to all of the other special interest groups.

21. With regard to lower levels within dE, organi2zational problems

- 37 - Annex 1 .1Page 1U f 10

are eVident with an overabundance of 'chiefa", that is directlyrelated to the progressive decline in real wages that has beenobserved since 1980. With salary levels frozen, the only manner toobtain a higher level of pay was to promote individuals to highercategory positions. An excessive concentration of authorities anddecisions are in Buenos Aires, relative to the dispersion ofactivities and clients that GdE has throughout the country.

22. At the management levels, problems persist with low morale andlack of drive to improve individual activities. The motives for thissituation, in the majority of cases, are due to:

- low salaries and small differentiation between categories;

- lack nf recognition for extra efforts and/or capabilities;

- permanent interforences from political and other interests;

- unrational changes in the plans and programs of GdE.

23. The apparent Loss of efficiency and prestige for GdE has led toincreasing attitudes of just doing whatever is necessary to maintainthe position and employment among many lower level managers, who haveconsiderable experience in the functions to which they are assignedand would prefer to see the company run efficiently, with a betterfuture for all concerned. However, this overriding defensiveattitude of maintaining their positions and their employment alsocontributes to their strong resistance to any possible incorporationof private capital into any of the activities which in the past havebeen the functions of Md. A fundamental change will be required inthe entire political and economic environment affecting GdE in orderto reverse the actual negative influences that prevail.

_ 38 -Annex I .0

Page 1 of 3

Tax.s, Rovalties, and Earmarked Funds

YPT I

a) Royalties. The 12S royalty which YPF pays the Provinces oncrude oil production is based on a 4referenced* price rather thanthe regulated producer transfer price. The *referenceo price inJune 1988 vas US$18.55/bbl and the actual transfer price was onlyUS$11S50. The burden on YPP for this royalty surcharge in 1988was USSl36 million based on a production of 161 milllon barrels.

The 12S royalty which YPT pays the Provinces on natural gaspcoduction is based on an outdated fuel oil price of US$16.68/bbl.YPF pays an equivalent of US$2.00/bbl royalty out of an equivalentUSSZ.44/bbl which they receive for gas sales to Gas del Estado.

b) Fuel Taxes. YPF charges thelr customers and delivers to theTreasury fuel taxes on petroleum products ranging from 65? onpremium gasoline, to aS: on kerosene. this fuel tax -ias abcutUSS2.5 billion in 1968 and if unchanged will average about USS5.6billion annually through 1995. The National Energy Fund (FNE)receives 352 of the fuel tax and this in turn is distributed 30Zto Rational Electric Energy Fund (FREE), IO for the Special Fundfor Electric Development in the Interior (FEDET). S3 to federal.electric utilities, and 252 to other energy utilities (Gas delEstado. YCF).

C) EnernY Taxes. A 3? tax on the value of oil processed in therefineries is destined for the development of hydro power (ChoconPC=C) and a further 52 tax goes to the National Fund for HajorElectric Worki (FNGOE). This tax is currently running aroundUS$170 aillion per year.

Gas del EZcado

a) Gas del Estado's annual gross income of just over USS1billion is only a quarter of YPF's gross income an their taxburden is correspondingly less. They have been given an exemptionfrom capital tax until 1990 and have a loss carry forward on theirfederal income tax which will last until the end of 1991. as delgetado acts as a tax collector for the federal. ?rovincia., andMunicipal authorities. In 1988 they collected as follows:

National

L. VAT, Pension Fund, and Energy Fund (10o of natural gas sales).


'Provincial

2. Taxes included in customers billings in Buenos Aires, Santa Fe,Rio Negro, Neuquen, and San Juan.

Huicipal

3. Tazes included in customers billings in Buenos Aires, Santa Fe,Rio Negro. Salta. Cordoba. Jujuy. Tucuman. Sgo. de Estero, Chlbut, andSanta Cruz.

Federal Power Companies

a) The federal power companies are recipients from andcontributors to a vatiety of funds. Reciiientst The federalelectric utilities receive 352 of the Natural Gas Energy Fund, and1002 of the National Funtd for Major Electric Works (FNGOE).Individually AyEg receives 652 of .he National Electric Fund(FUZZ) and Uidronor receives 1OOZ of the Chocon Cerros ColoradosFund (FCCC). Contributos-: A 52 surcharge on electricity salesgces to the National Electric Energy Fund (FUSE), another S2surcharge on electricity sales goes to the Chocon Fund (FCC) and athird 52 surcharge on electricity sales goes to the National Fundfor I jot Electric Works (TFOOS).

4. The irrational transfer of funds between the federal powercompanies and the various Znergy Funds in 1988 meant that the variouscompanies paid an aggregate of US$135 million into the Electricity Fund(PUSC) but received a total of US$98 mlllion from the fund. from the restof the Energy Punds the federal electric companies received an estimatedUS$364 million in 188. (See Annex I)

Annex 2.0

-40- Page 3 of 3

Estimated Transfors nteo and From Energy Fumb 1936USS *i I onI J$4nœw& £999

National Energy Fund (FNE)

From Liquid Fuels 1188Natural ps s0

To FNHE 128FIDEX 48Not. Electric Utilities 190lalance to be allocated 87

National Electric Energy Fund (FNEE)

Prm FN 126Electricity Seles 01

To FEDES ONot. Electrc Utilitles 117Balance to be allocted a

Choew Core" Colorados (FCCC)

Froe Electricity Sales 62Oil Proceslng 141

-; Nat. Electriec Utilities 203

National Fund for MIjor Electric Works (FNC0£)

From Electricity Sales 61Oil Prolng 94

TO Fedral Electric Utiilties 149to be allocated 6

SP CIl Fund for Electric Day. in the Interior (FEDEI)

From FNE 48FtEE so

TO Prow. Electric Utilities 109

Allocated to Nation. Utilities and Yacyreta

From FtE 190F4NEE 117FCCC ;P1N001 149

TO SECSA a6AyE 171HIORONOR 207YACYRETA 149

Annex 2. 1- 41 ~~~~~Pass I of I

- 41 -

Annex 2.1

Public and Private Enerav Investment Shares and Growth Rates

PUMLIC AND ENERGY SECTOR INVESTMENS( GDP)

e----------------------------------------------------------______…_____________1967 1967/70 1970/75 1975/80 1980/86 1987

Total Public Expenditure 31.82 35.092 41.182 46.172Current 24.12 26.742 29.75? 37.79ZPublic Investments 7.2? 7.71? 0.352 11.43? 8.38?Investment in the Energy

Sector 2.232 2.22? 2.742 3.46? 2.88? 2.53Z

As Z of National Publicinvestment 43.82 39.5? 44.2 44.5? 52.0? 51.6?

As 2 of Total PublicInvest,ment 30.97? 28.8? 32.85? 30.22 34.32

As Z of PublicExpenditures 6.98? 7.822 8.38? 6.232

Annual rates of actual increase in real terms

1967/86

Total Public Investment 13.72 2.0? 4.12 -102 0.5ZNational Public Invest. 12.31? -1.3? 6.62 -2.3? 1.8?Investment in the Energy

Sector 7.82 2.32 6.22 -2.22 2.72

PUBLIC AND PRIVATE INVESTMENTS(Increment Rates)

e----------------------------------------------------------__-------------Private Investment Public Investment

1967/80 12.6? 13.721970/75 1.8? 2.021975/80 4.8? 4.1?1980/86 -14.72 -10.02

1967/86 1.42 -0.52

- 42 -

Annex 2.2ARENTINA

PUBLIC ENERGY SECTORPROJECTION OF FOREIGN ODET 1999-1996

USS THOUSANDS YPF GAS DEL FED. POWER YACYRETA TOTALESTADO COMPANIES 1/

1909TOTAL FOREIGN DEBT 5289 2112 4170 1820 13849(of which current portion) 726 167 186 65 1086

1990TOTAL FOREIGN DEBT 6077 2024 4866 2040 1850s

(of which current portion) 560 182 le 64 994

1991TOTAL FOREIGN DEBT 4865 1906 4407 2169 18449(of which current portion) 6o1 161 284 70 1066



1994TOTAL FOREIGN DEBT 8975 1586 4116 2127 11756(of which current portion) 651 190 s00 196 1006

1995TOTAL FOREIGN DEBT 8646 1400 8067 2011 11026(of which current portion) 848 100 B49 209 1501

1/ AyE, Hidronor, and SEGOA

John A. Stoddert:mhc7/26/69

Annex 3.143 - Page 1 of 2

iI~

I~

o -a S

I~ ~ S: Sd 8 *

_ 44 - Annex 3.1Page 2 of 2

Annex 3. 1(b)

COMPARISONS OF UNLEADED GASOLINE PRICES IN ARGENTINA

AND OTFER COUNTRIES

U.S. Dollar Price is for one gallon of regular leaded gasoline. (An

asterisk follows a price for unleaded gasoline in countries where unleaded

is more widely used).

Argentina - (Sept. 88) $1.94(Dec. 88)(Apr. 89)

Australia 1.58*Austria 2.39*Bahamas 1.56Belgium 2.24Brazil 1.62*Britain 2.40Canada 1.52*Denmark 3.26Egypt .56Finland 3.81France 2.82Greece 1.71Ireland 3 4Italy 3.58Japan 3.39*Mexico .82Netherlands 2.71*Portugal 2.83Singapore 2.04Spain 2.22Sweden 2.77United States 1.06*West Germany 1.84

Source: Lundberg Surveys' Prices of Eastern Hemisphere countries andUnited States published April 14: for Western Hemisphere. March 17.

H

Annex 3.2

- 45 -

LPG Pricina

1. The LPG pioduced by YYP is sold to ODL at a transfer priceestablished by the governmnt. In 1987 the transfer price was $45 per tonwhich was well below ODE's average production cost. For the smll plants,e.g. Canadon Seco and Caimancito, the production cost exceeded $130 perton, but at the General Ceri plaet the production cost wae $86 per ton andat the Lowa La Lata plant it was $53 per ton. GDE's average productioncost was $81.76 per ton. The differential between the transfer price YPFreceives, $45 per ton, and the transfer price at which ODZ sells to LPGbottlers, $141 per ton, is another avenue whereby funds are transferredfrom YPF to ODE. In order to balance the payments from GDE to YPF, thetransfer price should be set at a level which would at least ensure thatYPP recovers all operating costs plus amortization and a return oninvestament. Th information is not available to analyze YIP's LPGproduction costs, but based on the volumes transferred in 1987 and thedifferential between YPP's transfer price and GDP's transfer price, YPFreceived the full transfer price, less the transportation cost of $19 perton, they would realize an additional $18 million annually.

2. ODE sells most f the LPG to privately owned distributioncompanies which operate bottling plants but it operates two large bottlingplants in the southern region where distribution is not economicallyattractive -for private owners. Table 7.3 shows the price breakdown at thewholesale and retail levels. GD1's sale price to distributors, which isset by the governmuet, was, as of December 1, 1968, $141 per ton (2040Austral per ton at an exchange rate of 14.5 Austral per $US). Thebottlers' platfom price, that is the price at which the LPG is sold toretail distributors is g275 per ton (4000 Austral per ton). The retailprice is not controlled by the government and currently (December 1986) itis 4.6 - 5.5 Austral per kg. ($330 -$380 per ton). Competition betweenbottling companies is vigorous and currently -- according to LPGdistributors -- retail prices are depressed.

3. Most of the LPG, 94S, is sold in 10 and 20 kg bottles by 5000retailers to approximately 5 million individual domestic consumers forcooking and some space heating. They consume an average of 15 - 18 kg permonth. There are about 12,000 comercial customers and two or threecompanies sell bulk LPG to small indust2ies and agrlcultural consumers forgrain and tobacco drying. The government does not offer any promotionalprogram to encourage LPG use and its use as vehicle fuel is prohibited.The LPG marketers would like for the government to institute a program toancourage LPG use as a vehicle fuel in regions where natural gas is notavailable. The distributors collect the value added tax and ln somemunicipalities must pay local taxes which usually do not exceed 22 of thesales price.

LPG Price Structure

YPJ Transfer Price 45.00 S/Ton 1987ODE Production Cost 82.76 $/Ton 1967Bulk Transport 25.25 $/Ton 1967Price to Bottlers 140.68 $ITon Dec 1988Platform Price 275.86 S Ton Dec 1988Retail Price 330-380 $/Ton Dec 1988

Annex 3.3-46 - PaeIfo 1

Annex 3.3

Details of 813*'. Tariff System

1. Residential consumsrs are included in Tariff 1. which by May 1985had four blocks of progressively decr asing rates plus a base charge. Theblocks are fort ti) up to 20 KWh/month, (ii) from 20 to 250 KWh/month.(iii) from 250 to 325 Kwh/moth, and over 325 KWh/month. In practice, thetwo first blocks have a very Important weight in SEGBA's earnings, as theylnclude 96Z of clients and 882 of energy consumption. While the structureis sound, it has never been fully applied. To produce a mooth transitionfrom the tariff system previously in effect, a progressive implementationof the new structure was devised but never realised. Annex 84 aIhows, oncomparable basis, the residential tariff structure prevailing in May 1985and in JanuLry 1989 which are compared with the "Theoretical, structure asapproved In 1983.

2. While the average rates declined from May 1985 to January 1969 forconsumption levels lower than 300 KWh/month, they increased for consumptionlevels over 300 KWh/month, which results in a transfer of income betweenaffected group of consumers. Tariffs Increased the limit for the firstblock from 20 to 40 KWH/month and set the lImit for the second block to 250MM/month. Annex 8.12 shows the actually applied rates for May 1985 andJanuary 1989. This Annex shows that for a typical consumption of 250KWh/month, the average rate of US$ mills 60 by May 1985 has decreased toU8$ mills 53 in January 1989. estimates of the total bill for consumers inevery block *ad the Internal transfer among groups of consumers show thatthe almost 2 million consumers, who consuae between 100 and 300 KWh/month-- 562 of the total number of consumers-- saw their bills decreased by US$0.12 to 1.30 per month, while the remaining groups of consumers saw theirbill' Increased. In partlcular, bills for the group which consumed between500 and 600 ZUh/month licreased by US$ 11.42 per month.

3. The tariff applied to the medium consumero, mainly low tensionindustrial consumers -- with contracted capacity between 3.3 and 25 KVA--is structured with a fixed charge, which depends of the contracted demandand an energy price in two blocks; the first applied to consumption whichdoes not exceed the contracted demand and the second for energy consumedover the contracted demand. This is a sound way to transfer the demandcharges to consumers which impose additional demand on the system and thusprecipitate the need for further investments in grid expansion. The currentprice difference between the twu blocks is 39Zt Rate variations between May1985 and January 1989 for this class of consumers are small between 1 and2S.

4. The tariff applied to larze industrial consumers is structuredwith a fix charge for demand which depends upon the supply tension --low,medium and high voltage.., thus reflecting appropriately the supply costs.Also power taken at off-peak hours are valued lower than the peak capacityand appropriate surcharges are included for penalizing the capacity factor--reactive energy. Energy charges also depend on the tension level and thetime of day -- peak, off-peak and night-. Annex 8.13 shows the tariffstructure prevailing by May 1985 and January 1989. expressed in dollarterm and using as deflator the 'indice de precios al por mayor'. It isdemonstrated that even though price increases applied to the tariffsttucture are substantial, ranging from 4.3Z to 25.02 in real terms, theaverage rate increase for the consumer is lower than the increase in thetariff level --between 112 and 142.

- 4-7 Annex 3.4Page 1 of 2

Annex 3.4

Example Subsidies and Distortions in the Hydrocarbon Subsector

1. Distortions from Non-Recovery of the Value Added Tax (I.V.A.)Under the Argentine VAT (IVA) system, all Argentine producers of goods andservices are allowed to pass-on, to the final consumer, the value added taxpaid by them during the production-marketing process. YPF is not allowedto pass on or recover the Value Added Tax previously paid to its ownsuppliers.

2. On the average, YPF's annual costs are increased by US$'30,000,000because of the exemptions imposed upon the inclusion of VAT in the salesprice (SE) of most liquid hydrocarbons. Cumulative cost from 1981 through1988 are over US$1 billion.

3. Forced Sales to Other Companies at Low Prices - In the intezest ofpromoting the development of other industries, which require hydrocarbonsas feedstocks or, in some cases when only a service is involved, theGovernment utilizes YPF to sell its crude oil, natural gas, and products atprices which are fixed by the SE below the market price. Some examplesare:

a) Petrochemical feedstock - with the publication of Resolution105/88, issued officially on August 31, 1988, the SE establishedthe prices for liquid hydrocarbons, LPG and gases utilized or tobe utilized as feedstocks by the petrochemical industry. Pricesare not established through negotiation between buyer and seller.Resolution 105/88 fixes only one price for each product to be usedfor petrochemicals without any regard to the alternative uses ofeach product or refinery integration involved. If shortages ofthe feedstocks should occur, YPF is required to import them tomeet its contractual commitments, but YPF cannot pass on theadditional import costs. Based on the established prices as fixedin Resolution 105188, and the volumes which YPF is currentlyproviding as feedstocks to petrochemical plants, the differencebetween international prices and those received represent asubsidy to the petrochemical industry of some US$68 million peryear; but YPF receives compensation from the Treasury to coverthis subsidy.

b! Sales of LPG to Gas del Estado - YPF produces approximately200,000 tons per year of liquified petroleum gases (LPG). YPF isrequired to sell all of its LPG to GdE at the low price fixed bythe SE of US$55.92 per ton. ^-'E immediatelv sells the same LPG tothe wholesale bottling plat- aF a price fixedJ bv the SE ofUS$163.17 per ton. This price differential amounts to an annualsubsidy of some US$21 million.


c) Sales of Residual Carbon (sponge coke) - Decree 2977 datedSeptember 18, 1984, re-e3tablished a previous requirement wherebyYPF was required to sell all of its production of residual carbonto Yacimientos Carbonlferos Fiscales (YCF) at a below-market priceof US$35 per ton fixed by the SE. YPF must absorb the differencebetween the market price of US$52 per ton and the price fixed bythe SE; this direct subsidy tc YCF amounts to over US$18 millionper year.

4. Tax on Crude Oil Processed in Refineries - Law No. 17,574 fixed atax of 52 on the value of crude oil processed in each Argentine refinerywith the proceeds dedicated to the El Choc6n - Cerros Colorados Fund forhydroelectric development. A subsequent new law, No. 19,287 fixed anadditional tax of 52 on the value of crude oil processed in each Argentinerefinery with the proceeds dedicated to large hydroelectric projects.Based on the internal transfer crude oil price set by the SE for June 1988,of US$72.37 and the total volume to be processed by YPF during 1988 of17,800,000 m3, this 1OZ refinery tax costs YPF about US$168 million peryear, which presumably continues to subsidize the development ofhydroelectricity.

5. Decree No. 1554/86 provided for the temporary importation of crudeoil for processing in Argentine refineries, and then reexporting refinedproducts with a higher market value. This measure provides the flexibilitynecessary to take full advantage of the new refinery conversion units.However, the 102 refinery tax, which applies to all volumes of crude oilprocessed, without regard to the source, effectively eliminates anypossibility of this temporary importation of crude oil for utilizing excessrefinery capacity, because the only result would be an economic loss. Thisrefinery tax so distorts the economic balance that, if YPF were free to doso, it would be more profitable to export crude oil than refined products.

6. Distortions from Low Sales Price of Crude Oil to Other Refineries.The SE fixes the volumes and sources of crude oil to be processed by eachrefinery in Argentina via a distribution process referred to as the 'Mesade Crudos". As all of the crude oil produced in Argentina is controlled byYPF, either from its own production or from its contractors, or purchasedfrom private concessions, the SE established the allocations of crude oilthat must be sold by YPF at prices set by the SE to Shell. Esso, and othersmall refiners. It is estimated *hat of the total crude *-l volume to beprocessed during 1988, some 25.5 MMCM, about 7.7 MMCM was aliocated forprocessing in the private refineries for subsequent products marketing bythose private companies. At the estimated internal sales price of US$86.10per m3, the private refineries paid YPF US$663,496,000 for this crude oilvolume. If YPF had been free to export this same volume of crude oil atthe estimated FOB price of USS10l t- CIM. it: would have received a totalincome of US$770,600.000. The differevnce nf ttSSl17.000.A00 was a subsidyby YPF to these private refiners.


IMPLEMENTATION OF DEREGULATION OF CRUDE OIL AND OI1. PRODUCTS PRICES

1. Negotiating guidelines should be established for domesticrefiners, crude oil suppliers, and international buyers of crude oil.

A. For domestic refiners, the alternative cost for crude oil supplyis the cost of international comparable ctude oil delivered totheir location (CIF) port of entry, plus any local handling coststo deliver to their refinery. This is the highest they would bewilling to pay.

B. YPF's or other crude oil owners' alternative value for local crudeoil is the international export value of comparable crude oil,less the international transportation costs to buyers location.This is the minimum value that YPF or other crude oil ownersshould be willing to accept for local produced crude oil.

C. Negotiation of a price for comparable crude oil between thetheoretical maximum and minimum values should also recognize termvs. spot commitme;.ts, the desirability of the crude to otherbuyers, and payment terms.

2. YPF must set sale guidelines for local produced crude oil not soldin the domestic market, which would be a candidate for sale tointernational buyers generally at a lower net value than domest!c sax.esbecause int.ernational freight to buyers location is subtracted.

A. The maximum an international buyer would pay for local producedcrude oil is the net cost to the buyer of a comparableinternational crude oil delivered to some internationalconsumption reference point. less the freight cost to deliver theArgentine crude oil to the same consumption reference point.

B. The minimum value for Argentine crude oil is some variable amountabove marginal production costs, which is set by overall crude oilproduction and management strategy.

C. Negotiation of a price for Argentina crude oil between thetheoretical LtximUw and minimum values should recognize term vs.spot conmitments, the desirability of the crude to other buyers,and payment terms.

3. YPF must establish the full range of other commercial terms andconditions for crude oil purchases and sales to insure compatibility withinternational terms and conditions. The appropriate authorizations fornegotiations of prices, terms. and conditinns for crude oil purchaseslsalesmust also be resolved.

4. Commercial rates for pipeline transportation and any marinetransportation offered to YPF crude buyers must also be resolved andcoordinated as part of an overall crude trading policy.

A. The minimum rate is the actual cost to YPF.

B. The maximum rate is the buyers alternative

- 50 - Annex 4.0Pag-. 2 of 2

5. The crude oil values "charged" to YPF refineries by crude oilowners must also reflect YPF's alternative market values to allow trueassessment of YPF's economic role in delivering crude oil to market.Guidelines for internal crude oil value assessment must be established foreach crude oil in each refinery to guide decisions on which crude oil tosell, retain for YPF's use#

6. YPF must establish long term objectives for each refined productand appropriate short-term and long-term product marketing strategies. Thefollowing examples demonstrate key objectives/challenges ir a competitivefree market environment:

A. YPF's fuel oil sales contracts should be totally restructured withlocal power companies to vary the price of fuel oil in competitionwith the international price (FOB) of comparable quality fuel oii,less any discounts required to meet local or internationalcompetition. Local power companies should be free to buyelsewhere. A key issue will be payment terms. The buyers shouldalso seriously consider the many possible fuel oil qualityreductions when it is made clear that they must pay for fuel oilquality.

B. Domestic and international jet fuel sales and supply strategy willalso have to be highly competitive, as all airlines will haveaccess to real international source jet fuel alternatives.Control of local airport jet fuel facilities will be crucial tomaintaining local market share.

C. Pricing policy will have to be established such that motorgasoline sales will be discounted as producers act to avoidmarginal dumping sales in international low price markets, andwill rise as marginal international values become seasonally moreattractive. Service, product quality, and price will becomeincreasingly important to the effective marketing of motorgasoline in local markets.

D. Gas oil marketing strategy will also have to examine internalcompetitive value versus international export value. Withmarkedly higher government tax on gas oil, parity with motorgasoline at the pump is predicted and desirable. Domestic demandfor gas oil Wi i fall. International margins for export sales maybe better. Domestic product quality of gas oil can probably bediminished.

- 51 -


CONTROLLED TRANSITION TO A NEW NATURAL GAS PRICING SYSTEM

Step I - Argreements and Commitments from all Entities

A. Explain in all possible detail to the Ministry of Economy, theMinistry of Works and Public Services (both at the Ministry leveland to the Secretary level). GdE and YPF the proposed stepsand appropriate actions necessary by each entity to effect thecontrolled transition from the actual natural gas pricing systemto finally attain a free competitive market system.

B. Finalize a comprehensive written agreement and commitment letterwith each of these entities covering the details of this process,with time deadlines for the completion of all required appropriateactions.

C. Define the tax revisions that will be effected, when these willoccur, and in what manner each of the current recipients of thesetaxes on gas sales will be affected during the transition periodand after implementation of the final alignment of prices with thelowest price alternative fuels. The entities are the nationaltreasury, the provinces, municipalities, and certain pensionfunds. Responsibilities for proper coordination of these taxmodifications should be clearly established.

Step II - Increase Prices for YPF and GdE to Cover Estimated CurrentProduction Costs

A. Increase producer price to a level which is either a) based on thebest estimate of current production costs for natural gas by YPF,and increase the transfer price paid by GdE to at least coverthese costs, or b) a fixed percentage (60 to 852) of internationalfuel oil value.

B. The royality paid to the producing provinces should be limited tono more than 122 of the actual transfer price paid by GdE to YPF.

C. Based on the best estimate of costs for purchasing natural gasfrom YPF, gas treating, transportation, and distribution, increasethe sales price to end users (or reduce taxes) to at least coverthese costs of GdE. Retail price for natural gas plus taxesshould not be increased above domestic fuel oil prices (includingtaxes).

Annex 4.1- 52- Page 2 of 3

Step III - Studies and Evaluation of GdE's and YPF's Actual Current andFuture Costs

A. Conduct the required detailed studies and evaluations of bothGdE's and YPF's actual costs (excluding any internal social costsof these State companies) to define actual current and futurecosts of exploration, production, treating, transportation, anddistribut4on of natural gas.

B. Long-term investment programs must be included for properdepletion determination, as well as projections made for the newnatural gas discoveries that will result from the explorationprogram.

C. A procedure should be established for adequate periodic revisionsof these detailed actual costs for consideration and use by theindependent regulatory agency to be established.

Step IV - Restructure of the Natural Gas Regulatory System

A. An economic regulation system should be established. Each step inthe delivery sequence would have to be monitored and regulated inaccordance with prescribed regulations and rules. The first stepwould be to establish legislation which defined the scope of theregulations, i.e. construction of facilitiesi tariffs, etc.; theresponsible organizat!in (s), and the extent of federal orprovincial authority; and, the regulatory structure.

B. The natural gas regulations should then be codified. Mostcountries have a code of regulations (Codigo de Electricidad) forthe electrical power sector; a similar Codigo de Gas would have tobe developed.

C. An independent regulatory authority for natural gas should beestablished as defined above.

D. Public utility type tariffs for natural gas gathering, treating,transport and distribution should be established by the regulatoryauthority based on the actual operating costs, investment recoveryand a reasonable rate of return on all fixed investments.

E. During the price deregulation phase-in period, the net-of-tax enduser natural gas retail sales price to industrial users(industries, refineries, power and others where gas is asubstitute for fuel oil) should be adjusted periodically toreflect the international price of fuel oil.

F. The unified single natural gas ad-valorem tax rate should beestablished and implement. If necessary an excise tax onresidential customers (above a certain minimum consumption) should

- 53 Annex 4.1Page 3 of 3

be implemented to bring the retail residential gas price(including taxes) up to the international value of kerosene(including taxes).

G. During the price deregulation phase-in period, the wellheadtransfer price for natural gas would be the net-of-tax end userretail sales prices, net of (1) the regulated tariffs for naturalgas services between the wellhead and the end users, and (2) theunified single natural gas ad valorem tax to the consumers.During this price deregulation phase-in period, the wellheadtransfer price for natural gas should increase as consumer retailnet-of-tax sales prices are increased. GdE's and YPF's actualcosts, as determined in Step lIl, must be utilized to ensure thatappropriate economically efficient incentives are provided.

H. The reference price for natural gas royalty payments to theprovinces should be the actual wellhead transfer price for naturalgas. Flexibility within the Petroleum Law allowing royaltiesbetween 5t and 122 should be used to enable continued productionof marginal fields.

Step V - Alignment of Natural Gas Prices with Full Value of Alternative

Fuel followed by Deregulation

A. Continue to adjust the net of tax sale prices of natural gas toapproach or equal the delivered price of the lowest pricedalternative fuel/feedstock. This would be 901 - 95? of fuel oilprice for industry and power, plus differential distribution costsfor residential-commercial users. If necessary for incomedistribution reasons, lifeline prices for low income householdscould be established and/or a supplementary excise tax for mediumto large residential consumers applied.

Step VI - Final Deregulation of Prices

A. At such time that the natural gas supply and regulatory system forsetting transport and distribution margins is in place andfunctioning in an acceptable manner, and domestic fuel oil prices(which natural gas is linked to) then are deregulated andessentially equal to international fuel oil prices, implement afinal free competitive market system with deregulated retailprices for large industrial consumers and where the wellhead salescontracts can be negotiated between the natural gas producers andpurchasers.

B. Implement a windfall profits tax on existing gas production ifnecessary, to capture windfall revenues in excess of natural gasinvestments requirements and reasonable return on investments.


Reforming Institutional Arrangements on Ga3 Production and Transmission

1. At present YPF is the sole seller of natural gas and GdE is thesole purchaser. The gas produced by private companies is bought by YPF ata negotiated contract price and resold to GdE at the transfer price set bythe SE. This system has two principal faults. First, it interposes athird party between producing companies and the buyer and second, itrequires YPF to sell natural gas at less than actual cost. The transferprice is less than YPF's production cost 8o it also loses money on its ownproduction. It is recommended that the buyer, whether it be GdE or otherpurchasers, be free to negotiate directly with all producers. The existinglaw grants GdE the right of first refusal to purchase all gas, but if GdEdoes not offer a fair price the producer should be free to negotiate withother customers. In addition, if GdE is the sole transporter it couldexercise its monopolistic position to force producers to sell at unfairlylow prices. Therefore, the producer should have the right to install itsown delivery system or to purchase transportation service from GdE at afair price (this must be regulated).

2. At present all of the natural gas sold to ultimate end-users istransported to the city gate and distributed by GdE. Decree No. 385provides that municipalities, private companies a- ' mixed public/privatecompanies may distribute natural gas through local urban networks but GdEwould continue its role as the only gas transporter in the country. If theexisting laws permit, producers should be allowed to negotiate direct salescontracts with local distribution companies or large industrial consumers.GdE should not be allowed to use its monopolistic position as the onlytransporter to limit access to its pipelines. However, GdE would have theright to charge a reasonable transportation tariff and to impose reasonableoperational requirements (with approval of the regulating iuthority)


Cost Based Tariffs for Transmission and Distribution

1. The tariff established by GDX or other retail sellers of naturalas should be cost-based and established using public utility tariff-settingmethods. GDE's existing tariffs are differentiated by class of service and(to some degree) by the transportation distance. This structure should becontinued and expanded to include categories of firm industrial anidinterruptible customers. This would allow the retailer to index cheinterruptible tariff to competitive fuel prices or to negotiateinterruptible service agreements with large customers who might otherwiseswitch awav from natural gas. 'When establishing the retail price toresidential customers, it may be necessary to provide some mechanism toassure that low income consumers are able to receive natural gas. A tariffbased on 'fully allocated' costs may result in gas prices which the lowincome users could not afford. There are a number of ways to deal withthis problem. They are briefly described below:

- The most direct method is to ^tilt' the tariff so that a portionof the costs are allocated to non-residential consumers. Thismethod is often used in industrialized countries to shift some ofthe fixed costs to larger volume industrial consumers.

- Lifeline or subsistence tariffs could be established. In thiscase the first increment of use, that required for subsistence,would be priced at a very low level. All use which exceeds thatlevel would be priced higher and would recover the remaining costof service. This has the disadvantage that high income consumersalso benefit from the reduced price.

- Energy stamps could be used. The low-income consumer wouldreceive vouchers or stamps which could be used only for paying fornatural gas. They would be redeemed by the government and theutility would recover all service costs.

- Service lines and appliances could be supplied at no charge by thegovernment. A large portion of the distribution cost is the costof installing pipelines to serve the customer and the applianceswhich would have to purchased. In some countries, such asColombia, the government has undertaken a program to provide freecooking appliances to LPG users. A similar program could beinitiated in Argentina.

2. A complete cost of service and tarification study will be requiredin order to determine the best option and to allocate all costs correctly.


3. An interruptible service agreement is somewhat different from theprogrammed interruption program now used in Argentina. Under aninterruptible service agreement the customer's deliveries can beinterrupted on short notice and they must provide their own stand-by fuel.This means they must have dual-fuel capability or be willing to shut downoperations when interrupted. There are a number of methods for designingan interruptible service tariff. It is normal practice to assign some ofthe fixed costs, usually gas acquisition costs and some portion of the costof the larger pipelines, to the interruptible customers. A detailed costof service study would be required to determine the appropriate type oftariff and the prices to be charged.


Netback to Producers from Reformed Pricing System

1. When well-head price controls are phased out and the royalty andtax structures are changed, YPF'a revenues will increase significantly.Table 8.1 provides an illustrative calculation of the impact of the revisedpricing structure, based on GDE's 1987 sales and 1987 operating costs. Itis assumed the retail price would be the international price of the lowestpriced fuel consumed in each market sector. The retail price bases are:

- Residential market. The price of imported kerosene, $147 perton plus a transportation and marketing margin of $37 per ton.The retail price of natural gas to the residential consumer wouldbe $131 per MCM ($4.62 per MMBtu), well below the economic net-back value of $200 per MCM.

- Commercial market. The price of imported gas oil, $154 perton plus a transportation and marketing charge of $25 per ton.The retail price would be $127 per CM ($4.50 per MMBtu). Thisalso is well below the economic net-back value of $203 per MCM.

- General industry. The export price of heavy fuel oil (HFO),$103 per ton plus a $20 per ton handling and marketing charge.The retail price would be $87 per MCM ($3.09 per MMBtu). This isessentially equivalent to the net-back value.

- Power generation. The dame as general industry.

2. Using these retail prices and GdE's 1987 sales, the total revenuegenerated would have been $1,459 million. From the total revenue GdE'soperating costs, $347 million, is subtracted. GdE's estimated operatingcost is based on historical data and may not provide reasonable return oninvested capital. The VAT is calculated at 152 of revenues to be $219million, and also subtracted to establish the net revenue, includingroyalties. A fiLeld treatment allowance of $5 per INCM ($87 million) issubtracted as is the royalty payment, calculated as 122 of the well-headproceeds to be $86 million. The producer's realization, net of all costand sales taxes would be S720 million. After allowing for field use andlosses, the unit revenue would be $48 per MCM ($1.70 per MMBtu). Based ornthe proposed gas pricing structure, YPF's before- income tax revenue wouldhave been over $400 million higher. The additional revenue resulting fromthe sale of gas from existing fields at the higher price could be used fornew gas exploration and production or returned to the government as taxesor dividends. The cost of producing new gas will be higher than thehistorical cost so the margin will decline unless international energyprices increase correspondingly. This system would encourage producers tooperate efficiently and minimize co-tq. thereby increasing profitability.

Page I of 1

41

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- 59 -


U6L7tIU - EI8?0lJ Of WLLS DUILLD (191 - 1988)(Ios drille by 1 and eteam)

-WlLs Drilled by 1ff- -tells Orilled Oters- -total Wells Drilled-gal. DBoel. Total lipl. DoBel. Total 1pl. Donl. total

leer1917 132 475 607 11 70 81 143 54S 6881978 84 533 617 0 225 22S 84 758 8419179 71 41 562 0 204 204 71 695 7661960 104 581 66S 7 267 274 1-11 848 9S91981 86 596 682 40 2U1 269 t26 825 9511982 75 736 8l1 34 98 132 109 834 943198 117 749 866 16 14S 161 133 894 1,0271984 136 809 94S 0 75 75 136 884 1,0201985 10 776 916 it 87 98 1St. 863 1,Ot41986 94 467 561 0 160 160 94 627 7211987 92 680 7721988 89 683 772

-60 - Annex 5.3Page 1 of L

i* rEIS& - ClOD! OIL PROIDCtIOI 516101 & IM1I1 1018 (1977 - 19188)(Crde oil produced by 1P Idas, service contracts, concession L isport)

-11! Crude Oil Prot.- Cosacssious laports total Avail. -Oe livered--rotIda. Coatract total Crude Oil tn lefiin. Prir. Ref id.

I I3 .3 o3 3m3 ,3 m3 3 c3 3 13

1977 18,786 6,063 24,849 193 1,435 27,477 20,365 7,S901978 17,790 5,219 26,009 244 1,954 28,207 20,415 1,1291979 18,276 8,185 27,161 274 1,487 28,912 21,057 7,5091980 18,368 9,802 28,170 401 I,IS2 30,323 21,312 .7,865t181 18,189 10,196 21,355 448 1,029 29,862 21,034 8,33719182 18,494 9,425 27,919 532 715 29,166 19,740 8,8161983 19,367 8,495 27,162 612 0 28,474 19,000 8,5321984 18,t7 8,344 27,141 698 0 27,839 19,086 8,12119185 18,tS0 7,721 25,971 704 -521 26,154 18,234 8,03019186 16,8S 7,726 24,582 597 -115 25,064 11,151 7,5771957 15,967 8,311 24,278 579 -11S 24,742 16,976 7,449I988 17,036 8,503. US,539 570 -464 2S,64 5 11,257 7,744

- 61 - Annex 5.4

Page 1 of I

U6UTIJI - JU RlL GAU PIODOCTIGI 1 UTILIUAIO3 lIlTOl? (1977 - 19188)(katual gau produced by F1 Ads. & service coatracts)

-0 lNatural 6a Prod.- - G ses of Iatural Gs Produced- dMd. Contuact Total Sell 4 1ell Others ia.inect Consued flaredam 3 ml 63 NN 3 ma a Im MN m3 m3 Na 3

Teat1977 10,1t3 1,418 11,531 6,556 71 676 994 3,2341978 9,782 1,664 11,446 6,202 73 SO0 1,020 3,1SIt179 10,939 1,606 12,545 7,329 8l 236 1,013 3,18251980 11,330 1,873 13,203 8,001 79 4U2 t,1tt 3,5501911 11,059 2,227 13,286 8,2S1 66 838 1,165 2,966;982 12,129 3,013 IS,2t2 9,699 66 953 1,241 3,2531913 13,572 3,SQ2 17,074 11,S92 67 1,012 l,2t0 3,1931984 tS,2916 3,354 18,6S0 12,719 72 860 1,317 3,6821985 16,033 3,079 19,112 13,115 76 826 1,442 3,6531986 16,205 2,977 19,182 14,230 91 497 1,449 2,91S1987 15,695 3,433 19,128 14,569 f02 477 1,430 2,5501988 est. 18,370 4,325 22,695 17,420 107 558 1,468 3,142

Note: The volue of matural gas consed includes shrinkageresultiAg from the esttaction of G I uatural guoline.

Annex 5.5- 62 - Page I ofl

IGEU?INA - PRODUCTIOU OPUATING COSTS of IPF ADNIRISTUTI03 - OIL & GAS(IlI values are O85hillioaS exezpt ptoduced voluus * var. unit costs)

lear 1988 Tear 1989 Average

IPF Total Espnses (Imcl. Ad. Overhead)

PersonnelExploration, Dtilling & Productiotn 413.7 5 324.8 5 169.3

efininqt trasportation & Marketing 5 226.9 $ 207.7 S 217.3

materials & Servicestxploration, DrilliAg & Production 3 504.4 5 481.5 8 492.7Itaialmg, Transportation & Marketing 499.1 5 4S152 $ 487.2

Total £ pesses: t 1,6144.1 $ 1,488.7 5 1,566.4

TnI Total nvestuents (Imcl. Ads. Overhead)

1Eloration, Drilling A Production $ 502.9 5 610.0 5 556.51etifimg, Transportation & Narketing $ 230.7 5 33.5 S 280.6

Total tnvestanat: 5 733.6 5 940.5 $ U37.1

TIF Total Auual ixpenss and auetuents: 5 2,377.1 3 1,429.3 5 2,403.5

TtI Production (by VPT Adtiaistratioa)Cude Oil, I3 17,036,000.0 16,404,O00.0 16,720,000.0Iatural oas, N I3 20,526,000.0 25,088,000.0 22,807,.000.0

1 ids. Oil & Gau Production Operating Costsfor £xploration, Drilling & Production

Personnel Expes (fixed) 3 413.7 $ 324.8 J 369.1Materials & 8ervices Expense (variable) S 504.41 481.0 9 492.7Administrative lnvestatent (find) 5 56.9 f 34.2 1 45.6

(1) Filed Op1rating Costs, per year 1 414.9(2) variable Operating Costs, per Unit of prod.

2/3 for Production of Crude Oil , 5/.3 S 19.61/3 for Production Natural Gas, sil aI 5 7.2

(1) Invutnents - Oil & Gas Operations, est. Estiuated Direct lnvest.

Note: All of tie tiove YPF budget costs excludo paymetu for contractors oil lndasu production, taxes, royalties and interest.

- 63-

Annex 5.6AiglITINA - INCUINITIL PlOD. COSTS (MUWINN EXPOIT less N~~ININ SPPLY) Page 1of I9A8 10 ON P? 8QUITS (1988-1989) & ME 1986 EVNIS PLUN (1989 - 2014)

-rude Oil Prod.- - at'l gas Prod----- -cost of ?- -Cost of P- IncrementalMinimum Mani.. 01ff. Minimum Mlimu fliff. min. Costs Nal. Costs Prod. C4stsN .3 N I3 N aS Ma .3 MN 233 N a)1 ussuillion USSaillion U8lmallaon

1989 25,691 25,69w 0 26,174 26,174 0 5 2,246.0 $ 2,363.5 $ 117.51990 26.,164 26,317 153 26,406 27,975 1,569 5 2,383.4 $ 2,868.6 5 485.21991 24,572 27,153 2,581 28,904 28,904 0 5 2,335.1 S 2,817.3 5 482.21992 22,950 27,708 4,758 30,572 30,880 308 5 2,265.3 5 2,830.2 $ 564.91993 21,494 28,195 6,701 30,572 33,240 .2,668 5 2,151.7 $ 2,822.6 $ 615.91994 20,245 28,621 8,376 30,572 35,070 4,491 8 2,093.1 $ 2,873.3 £ 780.2.1995 19,177 28,913 9,816 30,572 35,300 4,718$ 2,023.9 $ 2,917.8 5 893.91991 18,255 29,319 11,064 30,572 36,240 5,668 $ 1,963.3 $ 3,056.9 S 1,093.61997 17,510 30,704 13,194 30,572 38,170 !,598 5 1,919.6 1 3,158.5 S 1,238.91998 16,896 31,916 15,020 30,572 37,835 1,263 $ 1,856.4 $ 3,189.2 S 1,332.81999 16,434 32,976 16,542 30,572 39,280 3,708 8 1,824.1 S 3,219.0 S 1,394.92000 16,105 33,904 17,799 30,572 40,299 9,727 S 1,823.4 $ 3,323.5 S 1,500.12001 15,954 34,717 18,763 30,572 41,000 10,428 S 1,347.5 $ 1,790.4 5 442.92002 13,960 30,377 16,417 30,572 41,000 10,428 $ 1,275.8 $ 1,672.6 $ 396.82003 12,215 26,580 14,365 '30,572 41,000 10,42k $ 1,208.8 S 1,565.5 S 356.72004 10,688 23,275 12,587 30,572 41,000 10,428 $ 1,146.2 8 1,467.7 S 321.52005 9,352 20,350 10,998 30,572 41,000 10,428 $ 1,080.8 S 1,371.4 S 290.62006 8,183 17,806 9,623 30,572 41,000 10,428 5 795.4 $ 1,059.1 S 263.72007 7,161 15,581 8,420 30,572 41,000 10,428 1 775.4 S 1,015.5 $ 240.12008 6,265 13,633 7,368 30,572 41,000 10,428 S 757. $ 977.3 5 219.52009 5,482 11,929 6,447 30,572 41,000 10,428 $ 742.5 $ 943.9 S 201.42010 4,797 10,438 5,641 30,582 41,000 10,418 S 729.0 $ 914.7 S 185.72011 4,197 9,133 4,936 30,582 41,000 10,418 $ 717.3 5 889.1 $ 171.82012 3,673 7,991 4,318 30,582 41,000 10;418 $ 707.0 $ 866.7 $ 159.72013 3,214 6,993 3,779 30,582 41,000 10,418 $ 698.0 $647.2 $ 149.22014 2,812 6,118 3,306 30,572 41,000 10,428 S 690.1 5 830.0 S 139.9

Totals: 353,446 586,418 232,972 784,680 981,367 t96,687 8 37,561.9 55S1,651.5 $ 14,089.6

RPV 0122 70,819 45,986S 5,637.0

Note: Vith an average incremental cost for natural gan of US$18.58 per N a),then the portion of total incremenaUl production costs that correspondto the 196,687 NM . of incremental natural gas is equal to U8S3,654.4million. Production costs include all inesitments and operating casts.

The balance of total incremetal production costs, 05510,435.2 millioncorrespod to the 232,972 1 .3 of incremental cnude oil, for an averageQ854.79 per aS (08$7.12 per bbl.).

With bath volumes and incremental costs d4iscounted at 121 per-year, indthe same inicremental gas cost, crude oil then has an average productioucost of 08367.53 per iS (08510.74 per bbl.).

- 64 - Annex 5.7

A11g?TIIA - INCUNINTAL It? INCONI (UIIlU m19ou1 less NIIN SUPPLY) Page 1 of 1Uso 01 TIn 1916 EEll? PLUB / 60S INlls. I fit. COS1 (1989 - 2014)

--Crude Oil Prod.- -Nt*l Gas Prod- -Not lnoe From Prod.-Ninim alzimu Oiff. Niaiu Nuil Diff. inisu Maliuu Siff.m3 0 N3 11N e .3 NIN *l NN *3 88Sillion USSuillion USuillion

1989 25,691 25,691 0 26,174 26,174 0 S 1,946.2 $ 1,917.9 -218.31990 26,164 26,317 153 26,406 27,975 1,S69 S 1,904.7 $ 1,731.6 $ -166.11991 24,572 27,1S3 2,581 28,904 28,904 0 S 1,890.6 S 1,902.9 8 12.31992 22,950 27,708 4,758 30,572 30,880 308 $ 1,857.9 5 2,052.3 $ 194.41993 21,494 28,195 6,701 30,572 33,240 2,668 5 1,806.8 S 2,237.0 S 430.21994 20,245 28,621 8,376 30,S72 35,070 4,498 5 1,729.4 S 2,337.3 S 607.9199S 19,177 28,993 9,116 30,572 35,300 4,728 S 1,674.0 S 2,367.8 S 693.81996 18,255 29,319 11,064 30,S72 36,240 5,668 $ 1,627.7 $ 2,367.0 $ 739.31997 17,510 30,704 13,194 30,572 36,170 5,598 S 1,588.3 $ 2,451.4 S 863.11998 16,896 31,916 15,C20 30,S72 37,835 7,263 S 1,573.4 t 2,635.1 S 1,061.71999 16,434 32,976 16,542 30,572 39,280 8,708 S 1,S54.4 S 2,793.8 S 1,239.42000 16,105 33,904 17,799 30,572 40,299 9,727 S 1,529.0 $ 2,875.4 $ 1,346.42001 15,954 34,717 18,763 30,572 41,000 10,428 S 1,813.3 S 3,921.4 t 2,108.12002 13,960 30,377 16,417 30,572 41,000 10,428 S 1,672.4 t 3,S70.8 S 1,898.42003 12,215 26,580 14,365 30;S72 41,000 10,428 $ 1,553.6 S 3,268.5 S 1,714.92004 10,688 23,27S 12,S87 30,572 41,000 10,428 S 1,453.9 $ 3,008.2 $ 1,SS4.3200S 9,352 20,350 10,998 30,572 41,800 10,428 5 1,377.9 S 2,792.0 t 1,414.12006 8,183 17,806 9,623 30,572 41,000 10,421 S 1,554.8 5 2,894.8 S 1,340.02007 7,161 15,581 8,420 30,572 41,000 t1,428 $ 1,464.9 S 2,652.1 $ 1,187.22008 6,265 13,633 7,368 30,572 41,000 10,428 5 1,386.1 $ 2,479.0 5 1,092.92009 S,482 11,929 6,447 30,572 41,000 10,428 5 1,317.2 S 2,327.6 5 1,010.42010 4,797 10,438 5,641 30,582 41,000 10,418 8 1,257.0 S 2,195.1 $ 938.12011 4,197 9,133 4,936 30,582 41,000 10,418 $ 1,204.2 5 2,079.2 $ 875.02012 3,673 7,911 4,318 30,582 41,000 10,418 $ 1,158.2 $ 1,977.7 5 819.52013 3,214 6,993 3,779 30,582 41,000 10,418 5 1,117.8 $ 1,889.0 5 771.22014 2,812 6,118 3,306 30,572 41,000 10,428 S 1,082.5 S 1,811.3 S 728.8

totals: 353,446 586,418 232,972 784,680 981,367 196,618 540,096.2 S 64,543.2 S 24,447.0

Notoe: 1) the net vlihead value of crude oil is USt16.50/bbl. (U01103.78/m3).

2) the net nliltad valu of produced ut tural gin is US$1.25 per Ncf(US$44.11 per 11 W).

3) lot incose results frau gross incomu less total investmeAts, contractoil and gau production costs, and !PF Ads. operating costs.

4) Th not effect from *Coupre Argentino' and 'Contrate Argentine' on theinvestents, umterials, and contract services that 9F omuwt use in itszxploration, drilling, and producisg opetations is estinated to resultin an iacreasd cost of at least 40S. Us 601 value used herein forthse costs deonstrates the significant ecotohic effect on net incoves.

- 65 -Annex 5.8Page I of 2

Investment Requirements for the Next Five Years

1. YPP projected investment requirements, based on its five-yearaction plan, designed to supply the projected internal demand for petroleumproducts and natural gas during this period on an annual basis are asfollows:

ProductionRequirements 1989 1990 1991 1992 1993

Nat'l Gas, MM m3 20,877 21,389 23,412 24,716 25,481

Crude Oil, M m3 26,291 26,225 26,330 25,868 25,303

From Concess. M m3 600 550 500 460 500

From Contract X m3 *9,287 8,823 8,787 8,016 7,134

From YPF Adm. X m3 16,404 16,852 17,043 17,392 17,663

Develop Wells Needed 597 645 654 653 653

2. YPF's 1989 Budget calls for a total net investment of US$906,454,000 inproviding the production of crude oilsand natural gas a shown above. Thisamount includes US$41,336,000 financed for the refinery conversion project, andUS#$231,410,000 financed for the GUTA project. Excluding these financedprojects, YPP's actual investment for 1989 is budgeted at US$663,708,000. -

3. In 1990, most of the remaining investments financed for the GUTAproject, US$112,605,000, will be utilized, and therefore, the actual netinvestment by YPP during that year will be approximately US$782,000,000. foreach year, thereafter, YPP's investment budget will be about US$700,000,000 inorder to produce the volumes shown above for the respective annual periods.

4. For comparative purposes, the actual net investments by YPF during 1987were US$850,731,000, and during 1988 were slightly reduced to US$833,960,000.In both years the net investments included those amounts financed under the GUTAand the refinery conversion projects.

5. The annual volumes shown above, and the estimated net YPF investmentsfor the corresponding annual periods are only minimum requirements to satisfythe projected internal demand. Therefore, the five year program is demanddriven, and other than attempting to maintain investments to a minimum. no othereconomic considerations have been included. Since the Government's policy is tonot produce additional hydrocarbons for the export market, YPF is limited toonly meeting the internal demand objective for crude oil, refined products andnatural gas production.

6. Nevertheless, YPP's obligations, under the 1986 Energy Plan wasrequired to follow a much larger level of investments in exploration anddevelopment activities during each of the years 1986-1989: (cost estimates arebased on YPPFs actual 1988-1989 costs for these activities)

-66 - Annex 5.8

Page 2 of 2

Seismic Exploration Development Eat. TptalYear Lines, Wells Wells Investment, USS

1986 21,800 198 700 852 million1987 21,800 198 730 871 m!llion1988 21,800 198 835 941 million1989 21,800 198 894 982 millionTotalt 87,200 792 3,159 3,646 million

7. However, the actual exploration and development investments madeby YPV and private companies from 1986 to 1988, and those programmed for1989, show little relation with those specified in the 1986 Energy Plan,and have actually been as followst

Seismic Exploration Development Est. TotalYear Lines km Wells Wells Investment, US$

1986 10,141 94 587 515 million1987 18,580 92 880 620 million1988 10,128 97 656 570 million1989 15,491 95 678 496 millionTotal: 54,340 378 3,001 2,201 million

8. It is important to note, that the 1986 Energy Plan projected anincreasing level of exploration and development activity from 1986 throughthe year 2,000. By 1996, some 250 exploration wells would have beendrilled each year, with a total annual investment in exploration anddevelopment of about US$1,300 million. By the year 2,000, theseinvestments would have increased to over US$1,500 million. Based on theactual esperience of the first four years of implementing the explorationand developmiet investment programs, during which time the number ofexploration wells drilled was 414 less than programmed, and the totalinvestment was short by US$1,445 million, it is evident that the financiallimitations of the Argentine Government will only permlt YPF to provide forabout one-half of the specific investment requirements for the hydrocarbonsector. Therefore, significant investments by private petroleim companiesshc ld be required to be implemented, urgently and by all possible means,if te Energy Plan is to accomplish any of its future objectives regardingthe crude oil and natural gas sector.

- 67 -

Annex 5.9Pane 1 of 12

Annex 5.9

1. In this Annex are approximate English translations of fourdocuments:

1. Section of Law 23.697 on changes in crude oil and natural gasroyalty payments,

2. Hydrocarbon Deregulation Decree 1055g Upstream deregulationissued October 10, 1989,

3. Hydrocarbon Deregulation Decree 1212, Downstream Deregulationissued November 8, 1989,

4. Decree 1589, issued December 27, 1989

- 68 - Annex 5.9Page 2 of 12

TRANSLATION

Law No. 23.697Economic Emergency Law

Approved September 1st, 1989Issued parcially Sept. 15, 1989

CHAPTER XII

Petroleum and Natural Gas Royalties

Art. 32: The following paragraphs should be incorporated to Art. 1st. ofLaw 23.678t

'To calculate the royalties to be paid corresponding to July1989, and successive payments, the 'wellhead' value that resultsfrom the application of this law should not exceed theinternational price of petroleum that will be its reference,which would correspond to that prevailing the month before thepayment calculation is made for, and could not be either lessthan 802 of such price'

"Such international price will be the average of the officialexport prices FOB per cubic metric of the following crude oils:Arabian Light, Arabian Medium, Kuwait, Tia Juana Light and BonnyLight, as published by Platt's Oilgram Price Report in the columnOSP of the world Crude Oil Prices table, expressed in U.S.dollars, prevailing the immediate month before the productionbeing appraised'

'For the conversion of this average expressed in dollars percubic meter to australes per cubic meter, it will be necessary totake the exchange rate prevailing at Banco de la Naci6n Argentinaat the closing on the last working day immediately before the daythe transaction was made for paying the royalty,

"To determine the reference price for natural gas, the value tobe used will be 701 of the value obtained for crude oil asdetermined using the procedure indicated above, on a a caloricequivalence'.

Art. 33: The following should be incorporated into Law 23678, as Articles2nd and 3rd;

Art. 2nd. - The authority of application will proceed to discountfrom the reference price, as established in Art. lst., theexpenses incurred by the producer to accondition the crude oiland natural gas for markating"

Annex 5.9-69 - Page 3 of 12

"The discount thus established could not exceed the internationalvalues recognized par marketing under similar conditions, as longas these do no exceed 4? of the "wellhead value as determinedunder Art. 1st. above". The Executive National Power, with theparticipation of the Hydrocarbon producing Provinces, will modifyDecree No. 1671/69, with the purpose of making such decree moreadequate to the one established above"

Art. 3rds Yacimientos Petroliferos Fiscales Sociedad del Estado,or other concessionaires will calculate the obligations of theNational Government, in favor of the Provinces for the payment ofroyalties of crude oil and natural gas, using a 121 rate to bebased on the values resulting from the application of the abovedescribed articles'

'The Provinces could opt and agree with the Secretary of Energyfor the total or partial payment in crude oil, petroleum productsor natural gas of the corresponding royalties, which they willhave the free disposable for their marketing within the countryor abroad"

Art. 34s 'During the 180 days, to be counted from the effective day ofpromulgation of this law, for the calculation of royalties ofcrude oil, it will be possible to take 80 of the internationalprice determined as indicated in Art 1st of law No. 23.678 (textmodified by this law), and for natural gas, 70? of theinternational price of crude oil, at its caloric equ_.valencefn

Annex 5.9

-70- Page 4 of 12,

It i he N al Govnmets consern to bnce_sede te StWs cr i ntave sio in maste such e

fixing of pdics margins bourn.s, quouta etc. replacngthe man by Ins -arhs mobschnm.The Naiona Govarnnn's Palsy ia ragard hydroabonsI basean pen_udiw dw lain as whole ctivity,ths oading to a" emupeium sd bhc reftltsaon .9 puica& b Is dh Governmen' intention to-Introduce tbhus chagnw as qicl - Poss ibeInacdan_ Wi d a poy, the f dasposal ofhyroarbon pductio obtained under tw abovementiod chas is prdd Or. Such e" dipolre t local mareing " we a r exportationparposm

e applo o the frging exloat, exploitaionHYDROCARBONS DECREE No. 105S/89 ad dweelopmt schem requir -etig tims for each of

the viowu Au vld, tu eurg peroman.In view at Law 17319 sad MM w'd Articln, 9,10. and 11 of law 2366 and ate 2, 6, 11,9$W A U ad 06 of law 17519 ve te E utive Bnch withThe Nadiol Govenment ha decded to promoe th emaptnc on th subJet.reativatido of the xplato, o hydrorbon by mas_ NOW TERFORN,of Inrang the potducio el currently operaed by THE REINT OF THE ARJGNTIE NATIONYJP`Z DECREES AS FOLLOW&SSoe D oss opeat by Y.P.F. yield a low production a want of inahtivit ove and exteded perid and/or ARTILE Hrby1, atcs8, 9, 10 and 11 of Law 23.690s -_otaon and atdl 2, 6, 11,t a96d 98 of low 17319 a regulated,to orde So reacivate and inaue th producto of such delaing as of fist pority and necesty th promotion,marina Gelide, n exploitation c ha be devsd developmnat sAd eecution of plans Intend to increaeso a to pvid for thw eoctiv and diret pacpatio d the local production of liquid and gaseous hydrocearbonsprvat Iaet Inclh by-products, in ardw to ensur local self-LIwise, in tos ollields operted by Y.P.T. yielding a sufficieny and an adequate agin of reserve, achieve fullhighr prduction it Is nece_ay to att a highe development of petrochemical industries and attainrecovery of oil thmugh th adoption of tbniques of exportable surplus, favouing the industrialization ofassociated production, reource at soue location.Such techiques require the supply of modern technoloU A XICLE 2 AREAS OF SECONDARY INTEREST: Fcrand economic and financial means concurn with the the purpos of the enforcement of article 98 of Law 17.319develipment of oil field in asoiation with Y.P.?. Y.P.P. will, within a period of forty (40) days as from theThe foregoing prposd sctemes for the reaivation of effctive dat of the present dece, urnish the ENERGYhydrocabon prduction will remult in the collection of an SECRETARLAT with all existing technical informationexpoitatin or sociation f", the rate of which will relect concerning the eas that have the followingthe fild's potential, Its curnt level of production, itA charactetistice:surtfa installations and rmlted technical information a) those which to the effective dae of the preent decreeavaible have remained inactive for five (5) or wore year.The foregoig procts, cal for a clasification oth field, b) thos in which the average daily production, duringhen it is coered convenient to group them into areas, 1988, has not exceeded two hundred (200) cubic meters ofso a to encourP the exploration, exploitation and oU.developnt of the aos a a whole. The ENERGY SECRETARIAT will within the next 40The paricipato, in th production phase of the days following the submittal of the information, grantproiil States b considered a nsnea of attaining approvl for th inclusion of the areas in the program;econ_omc develpmnt and a stop towards the achievement YP.?. will within tgm (10) days a of the gr.nting of theof an activef tfedrasm apprvl, return to the Stat -by way of abdication- the

approved ares.

Annex 5.9

- 71 - Page 5 of 12

_aie oplettlea aow (obls) dat wh do Pubis hUMs,, ass.ch. we unblobJect of adeas In ae for bdo awaidea In pXes as In tw 1tWuaon compete BidsIeae, tm In Wh* V.P.P. Is attally caryIn o reeiA to In ade s In aeowdnae Wi the tar ofembamd wa w m da I neso lwoyae amluedA bur the arc III at low 11810.-_ - UdoW_AS AREas OF BDIHAC RECOVERY:V.P.P. ude the duerlist th do RGY Wii tht (SO) da Of th -Mettv dae at te prsenS rAZIAT a wihin a tIms o forty (40) day as dMe Y.P.? mulk INfoS th ==RT SCRETARIATurnthe M date of e present d will group the about th developmet progra n d Investmenthlsoltal mm (feld( ) mtabldhd in artfice 2, so a to budgt ed fo with respec to tose fid notsha a f *h eplor and expotaIo of put up for tender In cordane with th osboe st out inhyoecabons, wIch wm be approved by reoution ottf. toh present deeroo,

ENEGY SECTE . IL 10: Within ni (90) days of th ective daeA?Ig&L iVthdd tddsy (30) days r tho grantings o the pmst der YVP. wM cal gr Intentoalof the _prvat areas referred to in atIcle 4, th Competite Ds In ode t sel do lodca o freENEtaY SECRETARIAT wil cal for InteatIoal private compan/ls W m the w l enter intoCompitiv for their exploration, development and c or aclae wit regard to th aew or fildsexplot In tbu folowing mnners Anho d by the ENERGY SECRETARIAT, for the.a) dh am wi be awwded to the bidder olfg the purp of edntrutIng bsgat teonomlelly possiblehighe exploitation fee. The hMINISY OP WORKS volu o bydresbom eurIng thu op_mlsaton of theAND PUBLIC SW/RVICES my, at the poposal of the ial actleo ao In tu In Ad awn or field.ENERGY SECRETARIT, declare th ndr unaward ATfCLR 11: Companies interested in amacitn with* a rsult o th disadvantageous ntu o t hi bd. Y.P. must offr in the bidIng procedur a cas paymentsubmitted. by way of aoatlen Am.b) In oder o drmIne the fee the bidde wiU take Into a) The bidding conditlen wi specf thi paticipationaccount the remainig rsves and the invesmets pernta ad th responsibility of the associatedeffcwd In te area. comay In rspect of the opeatio of ech are or field.c) paymt o the e itation feo mut be made In cah, b) The pwtIcIpatin companies smut offr atte-of-ths-.tbefoe ety Into the a, to the NATIONAL tehnology aceording to the obJective staed in theTREASURY, who wil pay four pecnt (4%) to Sth foreoing artUcle, shing ppr evidence of txpernencerespective provincdal State as an advanced paymet of and economic and nandalt standing.corresponding royalty. c) Amogt the companies meting the requirements statedd) the hydrocarbon produced by the pantee of the in th above pargrph b), the awrd will go to thetendered ara unde the trms of the prest artici wil comnpy that offe the highet amount by way otbe Orey disposable. asotidon fee.e) th term do the concesson contact wiUl be that d) The assiation will be constituted pursuant to thesipulated by Law 17319. method so out in Secdon 11 of Chapter III of Law 19s50) In the case pvied for in article 2 paagraph b) of this (rtated tet 194).decrern contractor wll asume the obligation, durig the a) The mimum trm of the contrct will be twenty-frvde thre yaw as of the cimmengement date of the (25) yer.eontract, of yiding n annual production of hydrocabons AICLE It-1 The total amount of the asciation fee mustthat s no bml thansighty percent (80%) of tho voluma be pd in cash to the ENERGY SECRETARIAT by theproduced by Y.P.. in the yea immediaely preceding that grntee within sven (T) days of the comrmencement dateof th receptin of the area. of the contrat.6IU I± The exploitation arew (fields) rev rted to tbh ATICZ IS: As compensaton the emciated companyNtionl Stat purunet to afti;le 2, will be directly wIl reciv from the production of hydrocarbons thegrasd to th successW bidders of tendon envisaged in pentagw eorponding to its associaton, which will berIkle 5. freely disposable.A?ZS 3 Participation In the International Call for ARTICLE 14 REGARDtNG TUIE FRE DISPOSAL OFDid. praides fo in article S will be conditional on the I YDROCARBONS: The hydrcbon obtained frombidd fitusbhig sufficient evidence of technical eoacsen regulad by the Natonal Minin Code will bequallikatons, selvenc and financial standing. fey dispobl of a hunde and eighty days (10)

bum the effective dat a tha prnt der.

Annex 5.9

Page 6 of 12-72-

rmeI to la es I, pespwa d), a" is 1 Us do wd Sawme It14 Elba pre-at dsu wlh avumedyellewlag MUA. C _U TMU AREAS orregul1M PW3OATORY Dl3U3T Y.P.. Wl dwet to esa) _e a" be hub usobsa In lu.. ad frlg aN_ I Sat, witi t (15) da W et t ef e dnctivmabs wiM b m.dI IrgltomI oe.da Ofb psusat is... wus own as ret ber wbatb) Acess to do slwo or mass dsashlwAhed 1I ankle U of Law 13119. Wt the_movem, age sd &hPama as tEs eompals with epti oths to dte us d ubjeg matt ofinmdnal vaue wi be auted fr the compan. In firs a rllo fo bui sA wawa in p r oce.c) pmeat d hab oyalt on the bydro of mr 1'r lb purpiss so Oat In t artce, th sMrd_Isp shall ba bo. by ahe co=paies. in codanea establsd In a"tc9l Lw ILM1 wI be calculated swith th prvsls establusd by the ENERY bern do dat d the dem ordeig ab revaton trUSRTARIBLAT. _semmat lo a ea In fou d Y.Pr'. am guatoARTI 1 0L.IL CONCERNING TS1 EXPLORATION to bontrar beig h rby spisCONTACTS: As f td effective da o the psnt US=& OONCRNIN TM D3UGUATION Ofdeem hydrocarons obtained under cntrc TM INDUSTRIY: Witn fts (1) da a om the

rrespondItg ta t ift Rhund eo 8ids et out in deet date dam ma as abaIISR S 01Dom_e 148/S11 a'd 633/$7 will be bosy dbspw WCONOMY Ad PUOf C WOREO AND SEVICESThe be diposa wl be conditional upo th acaptam mst ubmi* a Wesi d espta p_ogred -of thd rduco of te terms for proasn ad deegulato S thdiuy b_isi d ba 1h at d theexlatIon a propoasI by Y.P.P. nd appovd by heo pow pi= o hrocabo poduetbe, I of theENERY SECRTARIAT. c0ntr'S so sad N squtai prtspads In theAR ILna17 CONCERNINma OREICN TRADE We d o ae l an ON that i gusa from allroasom reae to supply to toe ll m ar id, duly bs st that coatrlbute to Its fsmt_n Tb. progmwched for by the compan to theENRY t be drwn up must at fot objocte NW ten as d aISCRETARITZ the later y au owrisd bmprt o o propr follw-up mahmimor by-produsb required. ARTICLu 2i The MN rY 07 PUDUC WORKS ANDA8339LmU The Buha mntOind In t proviso of SERVICE at th proposal dof ENERGYarIcle 2 paragrap c) f Law 175174 ad ankle 2, SECRTARIAT aprovWe the idding Conditons forpaagrph b) of Law 19267 applicbble on 703 prc of the Exploitaton Concons - wel a the constitution ofcrud os t an prosd locally. is fixed a a rawt of companis associations sad a otmr form of agrcment0.1%. entered into by Y.P.F.. as provid for in the presntOiba 'tmporrAiy Impoate into the county fr deee.proces_ng. with the intetion of re-exporting th by- ARTICLE 24 Let It be pubished, deliveredproduec al a incesed value, wil be exmptd from to h Natlnal Registry and Ied.payment of the wmtureag.In h lar ca _ c ot eoly th, oil but the by-products alowi ha exmpt km any export or impert duty.ADTILL hi CONCIRNIN¢ THE HYDROCARBONPRODUCING PROVINCES: The hydrocarbon-producingpr 1ov Stats actin in association with loca or foreinprivate comPane wIl h qualified to participat and begte In the tender procsdin of aeas located In theirten.hIMSMGL3J Any expoitation aris (fields) abandoned orhwin scany ves, may he asgned to the provindalSBta In w_ trdiy they am locad, withoutpayt_ of t exploitation fee. The provincial Sta willdecde wheher to exploit We arew by themselve or Inssociat with pdvat loea or foreign compaies.

The MI rY 01 PUBLIC WORKS AND SERVICES,hrou th ENEOY SZCRETARIAT, wau authorisa the

Annex 5.973 !Page 7 of 12

leIatin. In all cuss, tho convasion will be conditionalon the ECUTIVE BRANCWS approval which will beprcede by the opion at the ENERGY SECRETARIAT.Contrwt executed punrsut to the roeme at Der1443/8S, as amended by Deee 623/87. ar excluded fromths foregoing prvisio. The MINISTRY OF PUBUCWORKS AND SERVICES wil within a ter of aHUNDRED AND EIGHTY (160) days. set ot the pdicyto be followed in thb ca of said contracts that mwSt becompatible with the pdrincpls laid down in Deem No.10S5/89 and in the prseut decOnce the abovemtioned tam of SIX (6) monts expires.YPF wil submit the prceedings to the ENERGYSECRETARIAT, who wfll ptope to the contractors themeaur qond appropriate fo the r-etablishmentof the economic finandcal equilibmShould thbi not be possible and sdoud jusifie reasons of

r_______________________,__________ public or fsal interet eit that obstret the continuanceDECREE NO. 1212/89 of the rpctive cOntrts, the Ener Sctaoiat win

ecide on the logd menau to be adopted fw sucb

The proceds d thm tansatIo wi be paid into aAMAlCILJ1 DEREGULATION. The objective is the spea account at the iMISTRY OF PUBUC OFderlation at the Hydcarbons sector. for wbich pupoe WORKS AND SERVICELreatim awe ablisbed so as to favou mrket The multianoul investment progms at YPF wdi bcmeabim in t xing d prices, alloction of amounts finaonced, prior appovl of the ENERGY SECRETARIATtran value and/or disonts in the vius stes of by meas of a charg to sad cot, contributing ih thisthe tWvity. way to the incea of th compay's net wth.

ABTI.CLL2 COMPETITION. The authorities win AIt4 FREE DISPOSAL The od produced byORter the eotece ot true and fair competitio under the now concessin holders and the pectoaWual coditions for all th companis that operate in the corresponding to the private partner wil be freeysc, whoth State mowd Ot pdvae, fo the benefit of disposable in accordance with article IS of Decree No.the gnal intet and the o 1SS/89.An at shol be made to improe the dfiency nd A RL:.& TEMPORARY ALLOCATION OFpro4ctiVe Maloction in the Seco, thus esduding the CRJDEL The ENERGY SECRETARIAT will continue toMae tran c of revens betwen in components as an allocate crude in accordac with the ytem in oce, asobjectiv fi the deregulation, for wcb pupose prime wi indicated in Annex I at the proet decreae up to Decemberbe diete towar the of export neutralIty. 31. 1990, unles a production volume is previosy reachedWV Wi ptimbe the integrtin of its activitie in equivalet to EIGHT MILUON (8,000.000) cubic mtersealdilom of autonomy that wi ensure its efficiency and pr year o oil of free diposl. As from that time thecompetitlve in equal conditions witb private aIcation of q.ot# of crde wil bhe eiimated and the oil.eompiaL owned by YPF, wil be freldy diposale. in accordance

with artide 15 ot Decrem No. 1055/59.ARIUILk EIXTNSION Of P FREEMARKEr. YPF is bby instrucd to neWotiato within a ATICLE 6: FR IMPORT AND EXPORT. Thep d Of SIX (6) months, with the parties to import of rtde oils and its bypoducts wi not requirebydcrbon elotito4, prductio and extraction pio autholiatioo nd wil be exempt frm import dutieeitrcts in fc, unde the tm of which YP is until expiratio of the team or fulmt of the conditiondblgad to reive the extrctd hydaros. the sated In artidce 5 of this decree

posib convi of id ontrots to tbh conceosio at Thereafter the impot d cr oil oand of its by-pioductsaocation $yste regulated in LAW 17.319 Ad rlated will be subject to the geon tart poicy.

Annex 5.9_74 - Page 8 of 12

As regards the export of crude oil Aad its by-products, the ARTCLE LLi REFINERIES. The installation ofENERGY SECRETARIAT will pronounce itself over the additional refining capacity will be free with no furtherexpert authorization within a maximum term of SEVEN requirement other than the compliance with the safety and(7) working days, as ftom tbe date the application is filed, technical rules established by the general regulations inupoM cOdclulon od which the export authorization will be force.deomed as automatically granted.

ARICLE 12 ESTAEIUSHMENT OF OUTLETS.ARgCzE 7 TRANSITORY REGIME. During the When the tem or condition set out in article S is fultfilled,period d transition the current tariff levd as well as its the installation d new outlets will be free, subject to theprice structure will be maintained in force, unless the safety and technical rules established by the ENERGYMINISTRY OF ECONOMY should decide to use the SECRETARIAT.authority conferted in article I d Decree 110S/89.

ARTICL13i TRANSITORY REGIME. The systemhM7Lgg&L TRANSITORY TAX REGIME. Within in force for the authorization of outlets will be maintainedSIXTY (60) days as from the effective date of the present until the condition for the fre installation of new outlets isdecree, the MINMSTRY OF ECONOMY and the Met.MNISTRY OF PUBLC WORKS AND SERVICES wUisubmit to the EXECUTIVE BRANCH a proposa for a tax ARTICL U1 FREE OWNERSHIP OF OUTLETS.system to be applied during the transition period. There wil be free ownership of the outlets when the term

or condition provided for in article 5 is fulfied. TheARTCLE 9- PRICE FREEDOM. At the end of the owners must comply with the tequirements of technical,tnition period oil prices wil be freely agreed. The prices commercial and economic competence established by theof oil by-prducts in their various stages will aso be appropriate authority assming all the liabilities arisingf 1eed1The MINISTRY OF PUBUC WORKS AND from the serviceSERVICES vi the ENERGY SECRETARIAT will propose Within a term of SIX (6) six months the ENERGYa reme of adequate compensation for the steady supply of SECRETARIAT will define the enftingements andgeogrphically distant aa of the country. establish the regime of corresponding sanctions

AIITICI PRICES OF NATURAL GAS. Once the &MICEIS: PRESENT OUTLETS. The existingtnsitin period is ended, the prices of natural gas to ownen of businese for the retailing of fuels may be

eonsme and prdues will be fixed monthly by the included in the regime of free ownership when their presentMIMSTRY OF PUBUC WORKS AND SERVICES via contracts expirmthe BNERGY SECRETARIAT untD such time as marketconditions of multiple bidder prevai. ARTICLE- 16: SAFETY CONDITIONS. ComplianceThe sal price of natural gas to industry power stations with national provincial or municipal regulations will be ofand the commecial seetom wil be NINETY PERCENT the exclusive responsibility of the company owning and/or(90*) of the average price of fdoil in the month retailing the fuels. The provincial States and municipaiitiesimmetd y priotr, at calori equivalent, wil exercise the policing of the outlets and will prant theThe ptice of comptr d natura ga will tend to be authorization for use if applicable.betwean SEVENTY PERCENT (70%) and SEVENTY As f(om the date of efectivenes of the free ownenhipFIVE PERCENT (75%) of the averae price of the gasoil regme any other prior allocation of responsibility will bein the montb immediately prior, at caloric equivalent, extinguished and any povisions contrary to the regimeThe pice tO riddmtial coners wil be determined on envisaged hereinabove will be repealed.the basis of the price to the producer plus the cost ofceWditioni0 transport and distribution. In cases where a ARTICLE 17 QUALJTY. The individual orlwe price for idential consumers is required, the corporation that is the owner of the identifying trademark

tamt cresonding to the subsidy will be distinctly of the outlet will be the only one responsible for theexprsed and chargd to the generd revenue, quality and quantity of the products and that same shouldTfe prie to the prducer w*i be fixed on a net back basis, conform to what is advertised or prmised.witb tranot and conditioning costs based on Verification and contrl wil be the responsbility of all theintenational value agencies that exercise authority in the area of 'fair

- 75 - Annex 5.9Page 9 of 12

d t an_ d o the ENERGY ANNEXISECRRTAT. ALLOTMENT OF QUOTAS OF CRUDE OIL

PRODUCED BY YPFAE A IhUMINATION OF RESRICTONS.

The MINISTRY OF PUBIUC WORKS AND SERVICESwill sbit, withn a period of THIRTY (30) das a drdt 1- Durng the transition and until a total productionlaw prpoing the diminaton of the limitatis set out in volume of TWENTY SEVEN MILLION (27.000,000) cubicarticles 23 (second paragralp) and 34 (scond paragaph) meters per year of crude oil of domestic origin is reachedof Law 17,319 in oder to faciitate the conversion of pro- the distribution will be effected on the basis of theexistnt contracts to the eime set out. in the present percentges arising from the aellowing annual volumes.derea and promote the participation of the greatest effective a of the fourth quartr of 1989.number of companies in future calls for bidsUntil the effective date of the legisation referred to in theprecedidAg paSagraph, the limitations contemplated in Law MM3/YEAR17,319wiIl be applied according to the regulation set forth in next YPF 19,020puaphb ESS 3.450Ia order to calculate the limitations set forth in atides 25 SHELL 3,280(seod paragraph) and 34 (second pararsaph) of Law ISAURA 96017,319 whe the holdGr of an explortion permit or tn SOL 160xpiotation concessio is organiea either as a separate DAPSA 130corporate entity or as a Temporary Union of 27,000Companie (*) or n association, the abovementioned

its shall be exclusively applied with respect to thea-pa,Ste entity Ot the Temporary Union of Companies as a The quotas of SOL and DA1SA will be understood aswho prvided that in aU case the same members are fixed.

The allocations will co0template1 if possible, themaintainance of habitusi qualities to esch refiner.

ARIT& I REGULATIONS REPEALED BYPRESENT DECREE As from the date of enactment of the The quota of SHELL indude ONE MILLION THREEet decree, the provisions incuded in deeest 337/83 HUNDRED AND FIFIY THOUSAND (1,350.000) cubic

and 690/81 and in Resolutions MOSP 510/83 of the metes per year, fixed, of crude Neuqueo - Rio Negro forMitry of Public Works and Service and SE 6/879SE the elaboirttio of lubricants55/86, SE 702/83 end SE 194/89 of the Energy In the regime in force, the quota of crude toresponding to

Secretariat re epeale YPF includes the THREE THOUSAND AND THIRTYAs km the date of commencement of the dectiveness of SIX THOUSAND (336,000) allocated to AsTRA. and YPFthe rgme freeg prices, the following regulations are supplie poducts to CGC and ASTRA, situation that willrepeed De 2233/84, 2404/84, Resolution MOSP be maintained during the transition period.649/82, 1OSP 439/83, OSF 649/83, MOSP 629/84 of As ftom now on, it wiUl not include any supply whatsoeverth Miitq of Public Works and Services. Resolution SE to ISAURA.174/86, S 177/86, se 105/87. SE 437/88 and SE 7/89 of All conditions of delivery wil be those stated in Resolutionthe Eney Secretrit. SE 621/85, as up to date.As from the date d commencement of the regime freeingthe establishment of outlets set out in article 12. 2- Volumes exceeding the total production of crude.Resolution SE 125/71 is repealed. domestic origin of TWENTY SEVEN MILLION

(27,000.000) cubic meten per year is asocated to YPF.

(T) al ton note: Legal form of joint venture provided 3- The volumes of crude oil freey disposable must befor in artidce 377/383 t Corporations Law 19,S50. deducted from the aUoted quotas as per this Annex, in

orde to maintain an adequate balnce in the tefiningcapacity.

- 76 - Annex 5.9Page 10 of 12

DECREE mO. 1569 ISSU¢D ON 12127189

IN VIEW OF LAW 17319, Decrees 1055/89, and 1212/89 andCONSIDERING:

That Article 3 paragraph 2 of Decree 1212/89 exempts contracts under Decree1443/85 modified by 623/87 from the regime and establishes that HOSP will fixthe policies for said contracts in accordance with the principles of Decree1055/89, establishing a period of 180 days in which to do this.

That it is in the Government's interest to establish clear and definitiverules to guarantee the stability and legal rights of existing contracts in thepetroleum sector.

That the so called "Houston Plan" contracts resulting from Decrees 1443/85and 623/87 have shown to be suitable for attracting investments for theexploration and later development of hydrocarbons.

That the first four rounds were reasmnably successful and resulted in theundertaking of considerable investments.

That the letter and viirit of the above mentioned decrees in the contextof deregulation supported .y the Government's petroleum policy should beapplicable to the "Houston Plan" contracts in that which concerns the principleof free disposal.

That there is a need to achieve this as quickly as possible to eliminateany uncertainty among those companies in the "Houston Plan".

In as much as Article 3 of Decree 1212/89 has established that MOPs willfix the policy for those under the "Houston Plan" the following regulations arenow issued.

Article I. On the exploration contracts.

Option at declaration of commerciality to.come under the "free disposal"regime of Ley 1055/89. YPF is instructed to included this clause in thecontracts if requested by contractor.

Article II. On the preference for gas purchases.

G de E must reach agreement with producers who wish for "free disposal"of gas within 30 days of receiving an offer from the producer. The preferentialright of G de E to acquire the gas will expire within 30 days. In that case,the producer may dispose of the gas under the terms of Article 15 of Decree1055/89 and Article 4 of Decree 1212/89 and the complementary rules establishedin the decree.

Article III. The export and import of hydrocarbons.

The export and import of hydrocarbons and products is authorized and thesewill be exempt from all duties, tariffs retention present or future. Theseoperations will not benefit from repayment or reimbursements now or future from

- 77 - Annex 5.9Page 11 of 12

the effective date of this decree. Export documents will be authorized accordingto Article 6, para. 2, Decree 1212/89. These documents can cover a singletransaction or a program of exports of liquid hydrocarbons but cannot be for morethan one year.

Article IV. Exchange Rate.

The exchange rate to b? used to settle the local currency portion of theexport and import of petroleum products will be the selling rate quoted on thetransfer of USS by the Banco de Argentina at the close of operations on the daypreceding the settlement date. If there are more than one exchange rate, theone which better reflects the real exchange rate will be used. The Central Bank,jointly with the Ministry of Economy, will establish the arbitration proceduresto b)e used in agreement with the concessionaire.

Article V. Free Disposal.

Producers with the right of free disposal of crude oil, natural gas orLPG in accordance with the terms of Articles 6 and 94 of Law 17319, Articles 14and 15 of Decree 1055/89, and Articles 3 and 4 of Decree 1212/89 and producerswho in the future opt for this will have free disposal of the foreign exchangeestablished in the tenders and/or renegotiations agreed in the respectivecontracts. Whether the hydrocarbons are exported - in which case producers willnot be obliged to bring in the foreign exchange corresponding to said percentage,- or if sold on the local market - in which case producers will have access toforeign exchange corresponding to said percentage. But in no case will theforeign exchange component excede 70Z. The disposable foreign exchange will bein effect for all exports of crude oil and for products derived from the refiningof freely disposable crude. For the conversion of the percentage of foreignexchange due, the exchange rate mentioned in the previous Article will apply.

Article VI. Restriction on Exports.

In case the Government establishes export restrictions on crude or productsArticle 6 of Law 17319 will apply under which the producers, refiners andexporters will receive for each barrel no less than the value of crude andproducts under similar circumstances (prer mably FOB prices). Where restrictionsapply on the free disposal of gas, the price per mm3 (of 9300 BTU's) will notbe less than 35Z of the international price of 34 API Arabian Light. TheGovernment must give 12 months notice of export restrictions. The exchange rateto be used under this clause is that of Clause 4.

Article VII. Transport of Hydrocarbons.

The owners or concessionaires of oil lines, product lines, etc. areobligated to transport as long as there is capacity the hydrocarbons belongingto third parties at the same price for the same circumstance. Until there iscompetition in the pipeline business the S.E. may fix the transport costs asprovided for in Article 15(b) Decree 1055/89.

Article VIII. Interchange of Crudes.

- 78 - Annex 5.9Page 12 of 12

To effect a rationa. utilization of pipelines and better handle theavailable production YPF and the producers :an agree on crude swaps.

Article IX. Pipeline Transport Concessions.

In accordance with Article 39 of Law 17319 the Government may, whennecessary, authorize pipeline concessions including tanks and pumping stationssubject to general laws and technical norms. Those companies with existingcontracts will be substituted by what YPF authorizes in its role as owner of thearea under Article 28 and in accordance with Law 17319. The steps necessary toobtain the rights in accordance with Article 42 and the Mining Code must be takenthrough application to the AUTHORITY with the obligation to advise the decisionsadopted by the mining authorities where pertinent. This regime will be appliedto all future contracts in their different kinds.

Article X. This regime will be applicable on all future contracts whatever their nature.

Article XI. From this date the dispositions of Decree 6220171 areabolished.

JAStoddart:mhcFebruary 16, 1990

- 790-79- ANNEX 6.1

Page I of 2

EVALUATION OF YPF AND PRIVATE REFINERY CAPACITY

a) Total topping capacity stands at 710 thousand bbls per day, withYPF, ESSO and SHELL controlling 97 percent.

b) The small private refineries are relatively unsophisticated,filling special niches in the market.

c) YPF plays a dominat ro , with 62 percent of topping capacityand 68 percent of bottoms conversion capacity. However, &lmost15 percent of YPP's topping capacity is concentrated in 'toppingonly refineries, and it is not clear whether all of theirproduction sees efficient conversion as feedstock in otherrefineries. In addition, the capacity of La Plata, the largestrefinery, currently includes topping units which are grosslyinefficient and ineffective even for processing light crudes.

d) Nite average vacuum capacity, as a percent of topping capacity is41 percent. This would have to be increased, if localrefineries wish to efficiently process heavier, Imported ordomestic crudes, either for their use in the local market or forexports.

e) The total bottoms destruction capacity of YPF's two largestreflneries provides them with efficient capability to producehigher yields of clean, higher value products through fuel-oildestruction. In this regard, YPP refineries have a clear edgeover the ESSO refinery, and both appear to be better off thanS-RL. However, a closer look at SHELL overall refiningoperations, versus the others, leads to the conclusion thatSELL has the potential to be more profitable in currentoperating conditions, and, marginally, could be more capable ofhandling heavier crudes.

f) The SHELL refinery has greater vacuum capacity than both ESSOand YPF, which means that SHELL can effectively handle heaviercrudes without by-passing processing steps. The SHELL ref!neryalso relies heavily on visbreaking to further reduce fuel oilyields. SEELL's refinery reliance on catalytic cracking is justunder YPF's capacity to produce gasolines instead ofdistillates. SHELL clearly has a different strategy than ESSOto reduce fuel-oil, while pursuing higher conversion. SHELL'sreforming capacity, as a percent of topping, is the highest ofthe three in Argentina, and almost twice that of YPF. Thus,SHELL is best positioned to produce marginally more motorgasoline than its competition.

- 80 -,AMN 6.1Page 2 of 2

g) ISSO and YIP have similar refining strategies, in that they relyless On visbreaking and more oan coking to reduce fuel oilproduction. This would be viable, if there is an economicoutlet for coke -which has not been the case In the overregulated Argentine economy, which has price i coke low tosubsidize the national coal company (YC?). The combination ofhydro-cracking and catalytic cracking capacity, in YPF'srefineries, gives them an edge over both ZSS0 and SHELL In totalcapacity, but 3880 is the strongest as a percent of pipe stillcapacity.

h) YPF controls significantly more refoming capacity than anyother company, however, as a percent of topping capacity, theYPp reforming capability is still weaker than the rest ofIndustry.

-81- ANNEX 6.2

Page 1 of 3

INEFPICIENCIES IN PRESENT REFINERY OPERATIONS

1. The term 'Production Barrel^ is used to describe the relativecoposition of refined petroleum products produced by a refinery as afunction of crude oil thoughput. This approach clearly provides anindication of the actual performance of any refinery in producing highervalued, higher quality cleaner products, as opposed to lover qualityproducts. The results of a complete analysis of the situation, using thisapproach, shows that the collective impact of sector regulations,operational restrictions and pricing practices, have acted to prevent fulloptimization of refining yields, and also provide a complete picture ofArgentina's present refinery situation and historical performance.However, this analysis should be valid only to show relative trends, butnot the absolute economical situation.

2. The primary role of a refinery is to convert crude oil intofinished products required by the market. The physical facilities existingin a refinery, the severity of refining operations, the intrinsic naturesof the crude oil feedstocks, and the desired qualities of the finishedproducts required by the market, all act to set the relative yields offinished products. Under normal conditions, a refinery operatormanipulates all of these variables to maximize refining profits. This hasnot been the case in Argentina and, thus, there are significantdiscrepancies between Argentine conditions and international standards.

3 A knowledgeable marketer of refined products would allow tooperate his refinery only if it is less costly than buying the requiredproducts in the open market. In the past 10 years, significant worldw.iderefining capacity has been shut down, mainly because the refineries couldnot compete with the purchase of finished products. As a consequence, manyexport refiners, including the relatively sophisticated refineries locatedin Rotterdam, have operated with low or negative margins in recent years.However, this has not been a factor up to now for the inefficienciesdetected in the sheltered Argentine refining industry .

4. Disregarding the lack of incentives to fully optimize the cost ofrefined products brought to market, or to optimize refining operations,even if less expensive finished products could be purchased, it is obviousthat the Argentine refining industry has gone through a virtual revolution,when 'Production Barrel' statistics are reviewed, as we will discuss below.

5. The relationships between clean and dirty product yields aresimple and generally valid indicators of increasing refining capability toproduce higher quality products, through a combination of capitalinvestments. operating changes and blending discipline. In Argentina.between 1970 and 1986, the percent of clean product yields increased from50Z to 71Z . This was almost a 50Z improvement of clean products for allthe industry, and YPF refineries rose from 452 to 70, while private yieldsrose from 56Z to almost 74 Z. This indicates that private industryrefineries have been the leaders in this regard, but YPP performance hasbeen equally important. The improvedyields in the next few years, stemingfrom the new conversion facilities, could be as good or better than those.of the private refineries, if YPP fully utilizes the economic potential orthe new facilities.


6. A more detailed analysis of product yields, analyzing each productby product pool, shows the same trend as the simple clean versus dirtyproducts review. However, following this detailed analysis, it becomesevident that the yield of gas-oil (Diesel, in international tradelanguage), was the clean product with the largest growth over the studyperiod. Industry production went from under 17? to over 35S, between 1970and 1986, and the trend was continuous. During the same period, YPP'syield of gas-oil went steadily from 172 to almost 362, while private yieldsrose erratically from 16? to just under 352. Accepting that privaterefiners are usually more responsive to economics, than YPP has ever been,then YPP's steady growth had more to do with production quotas thanrefining economics.

7. Overall Naphtha yields (Total of regular and premium gasolines,plus aviation gisoline) also increased slightly over the period, but thepattern was highly erratic for all industry. Private refineries showyields which are significAntly higher, both at the beginning and end of theperiod under study, but still show about 10 percentage points higher thanYPP yields over the same period. This analysis doeu not permit anexhaustive evaluation of refining margins, but these yield analysis andother studies, which will be pointed out in this report, lead to theco4clusion that YPP refining operations have not been as profitable asthose of private refineries.

8. YPP's yields of jet fuel and kerosene are presently twice thoseof private industry refineries, although YPP started out with a lower yieldin 1970. This conclusion is consistent with recent market share data.However, earlier diagnostic studies indicated that YPF could easilyincrease its jet fuel yield by 25? to 30S,-or about 1,000 cubic meters perday,-at the expense of gas oil, if international sales or export marketswere pursued. Similatly, an equal volume is probably currently downgradedby private refiners. From this, it appears that the refining industry isartificially limited by local self sufficiency concerns, but withincreasing access by the private sector refineries into the domestic jetfuel market, the private sector will most probably swing their refineriesto capture as much as possible of this better market. Therefore, unlessinternational trading is deregulated, this competition from the privaterefining sector for the marginal domestic jet fuel barrel will just cause adowngrade in both YPF refineries yields and profits, with minimal nationalbenefit. In this restricted local market scenario, the growth in YPF jetfuel yields, from 45? of the volume produced in 1970 to 86? in 1985, couldbe significantly reversed.

9. The Argentine industry for lube oil production has increasedyields from an average of 1.17? to 1.37?, however, private yield growth hasbeen stronger, in the range of 1.27 to 2.01 X. while YPP yields have rangedbetween 0.89? to 1.372. Although the volumes are low, but the profitpotential is significant. mainly because there is a strong possibility thatthe overall lubes qualities have not been fully exploited. A diagnosticevaluation of YPP operations shows, that 60,000 cubic meters of lube stock,or a 30? increase in YPF's production over 1986 volumes, is possible. Thiswould further reduce fuel oil yields, since significant marginal lube oilstock production is in effect degraded to the low value local fuel oilpool, when the lube oil stock has an international trading value that isabout twice that of gas oil. The required investments for upgrading thefacilities for lube oil stock production have a potential DCF in excess of100?.


10. The yield of the largest volume of the so-called dirty products(Fuel-oil and diesel) went steadily down from 302 to less than 29Z duringthe study period. YPF's production dropped steadily from 54S to 30SZ, butthe private industry refineries yield was reduced even more, althougherratically from 442 to 26Z. Further review of the data, from 1986 throughthe present, indicates that the private sector yields have decreased evenfurther, as their market share dropped, which also indicates that theprivate refineries have the ability to optimize their profit even on thebasis of highly regulated prices, while YPP is less adept at adopting thenecessary changes, mainly because it is forced to a great extent to performits social obligation, and contributes to subsidize the power sector,where margins are low, as recent market conditions indicate.

- 84 - AamaK 7A

AVERAGE INCREMENTAL COST CALCULATION FOR GAS

1. Ezploration costs must be included in the analysis and recoveredover the productive life of the fields which were discovered. In many, ifnot most cases, exploration programs are undertaken to discover oil so itmight be argued that the cost of gas exploration is near zero. However, insome gas-prone regions natural gas is the target. As the Argentine economybecomes increasingly dependent on natural gas, new reserves will have to bediscovered so it is reasonable to assign some portion of the explorationexpenses to natural gas. YPP has proposed to carry out an extensiveexploration program over the next ten years to increase the natural gasreserves. They propose to conduct seismic surveys and drill exploratorywells in all three of the producing provinces. The Secretaria de Energiacalculated exploration costs to be $5.43 per MCK of gas in the Neuquen;$7.48 per CM in the Austral; and $5.87 per MCM in the Noroeste. Based onan analysis of YPF's historic costs, the estimates for theNeuquen and Austral basins appear reasonable, but for the Noroeste basinthey are low. Therefore, the exploration costs used in conducting theeconomic analyses are: Deep Neuquen $10.00 per 1M4; Austral Onshore, $7.50per MCM; and Austral Offshore, $10.50 per MCM. The cost of exploring inthe Northwest region is very uncertain because previous exploration hasbeen very limited. Therefore, two values which are expected to cover therange have been used in making the economic analyses. The lower end of therange would be the historical cost, $3.87 per MCM while the upper end wouldbe $12.00 per MCM.

2. The average incremental cost (AIC) of producing gas is a functionof the cost of producing wells and appurtenant equipment and facilities;the production rate of wells; the well fluids composition; and the qualityof the gas. The AIC could be ralculated for each known field, based onknown or projected field and sell performance and the average could becalculated on the basis of the projected rate of production from eachfield. However, this is a time-consuming procedure so, for thisevaluation, the AIC was calculated for a single field which was adjudged tobe typical of the fields in the basins. The Loma la Lata field wasselected for the shallow Neuquen basin; the Aguarague field for theNorthwest basin; and the Condor/Redondo field for the Austral onshorebasin. As there are little or no date for the Austral offshore and DeepNeuquen basins, the performance characteristics were estimated on the basisof geological inference. The AIC was calculated on the basis of the all ofthe energy produced from the well, including natural gas, natural gasliquids (NGL) and condensate. In order to calculate a wellhead cost ofproduction, all of the costs must be included. It would be incorrert tocredit the NGLs and condensate at their full market value unless allrelated investment and operating costs were allocated to their production.By calculating the AIC of the total wellhead stream, the NGLs andcondensate are credited at their energy value. It would be better tocredit each product at its market value and allocate all related costs tothat product. However, that requires an iterative procedure which wouldnot change the calculated AIC for natural gas significantly. The AIC forgas delivered to the main pipeline for each producing and prospectivebasin, including gathering and gas treatment costs, based on a 122 discountrate, are susmarized below:

- 85 -Annex 7.1

Page 2 of 8

AIC AICBASIN FIELD STATUS $SMCM $ MCF

mmm mmmmmmisn=m mmn

yeuquen Lomi la Lata Producing 9.45 0.267Noroeste Aguarague Producing 18.21 0.515Austral Condor/Redondo Producing 7.35 0.240Deep Neq. -- Prospective 11.46 0.324Offshore -- Prospective 8.35 0.236

3. The incremental cost of transporting gas from the field to BuenosAires is a function of the cost of the pipeline, the operating costs andthe utilization factor. In order to estimate the cost of meetingincremental demands, the long run merginal cost (LRMC) has been estimatedfor the pipeline delivery from the Neuquen region to Buenos Aires. GDE hasestablished cost estimating standards for constructing pipelines inArgentina, but the standard costs appear somewhat low when compared to costestimates for other Latin America gas pipeline projects. In view of thesevariations, costs for the Neuquen pipeline and the Northwest pipeline wereadjusted to reflect recent bids for pipeline projects in Latin America.The LRHC for deliveries from the Northwest were estimated on the basis ofthe pipeline distance relative to the Neuquen pipeline. The pipeline fromthe Austral region will be more expensive. primarily due to the cost of thecrossing at the Strait of Magellan. SNAM Spa. prepared an estimate of thecost of a pipeline from the south to Buenos Aires in 1988. Based on thisestimate, the LRHC for transporting gas to Buenos Aires is estimated to be$29.67 per MCM. The LRHC was estimated to bet

TRANSPORTATION COSTROUTE $I/MCM S/MCP

Neuquen - Buenos Aires 13.29 0.376Austral - Buenos Aires 29.67 0.840Noroeste - Buenos Aires 16.92 0.479

4. The economic cost of gas delivered to the city gate, that is thepoint of custody transfer to the distributor or bulk customer, includes thecost of exploration, production and pipeline transportation. There is anadded economic cost to deliver the gas through intermediate or low pressurepipeline mains to residential, commercial and industrial customers. Itincludes the cost of recovering the capital investment and the operatingcost. The distribution costs are affected by the cost of attaching newcustomers; the operating costs for reading meters, preparing bills, etc,;and the quantity of gas consumed. The average attachment costs which GDEuses in its cost estimating manual for a city of 20,000 customers wereused. The operating costs were based on <-DE's historical levels and thelevel of consumption was based on the aver&ge consumption of customers ineach classification in 1987. The investment and operating costs for a longterm period, in this case 20 years, are discounted at 12? and the presentvalue is divided by the discounted volume of gas used each year. Based onthe average demand for commercial, institutional and small industrialcustomers, the economic cost of distribution service to each customer classist Resedential - $48.30 per MCM

Com rcial/institutional - $46.20 per MCMGeneral industry - $4.12 per HCM.

ARGENTINA GAS SECTOR tSTUD

DEMAND PROJECTOO (BSASS CASE)8/C/TRAUS GOE UIPOTESIS MVUIA POST 2000 DEM"D GROUTUIWDIREF GDE 4IPOTESIS EDIA w asv so54400 OmCMPETRCN WDE UlPTESIS MEDIA RESWCOW 3 X/YRPmSER SECT ENEIGIA ESTIMATE (HARCM 1969) TRANSPORT 4 V YR RSVADON 0 miosYINPORTS 6 MM60. INUSRY 2 VtR fUELUSE 10 SEXPORTS DOlS REFIUERY 1 X/Yt

DOMESTIC COYICL TRANSPORT IUDUSTRY REFINERY PIRCUE POSER TOTAl TOTAL PROD/ITNS INTERNAL CMUH RSV REMAiNING ISVILIFEUSE USE USE USE USE USE USE CONSUIP IMPORTS USE aROD PRO ADDED RESERVES INDEX

TEAR oC" OmCM NM&0 96CM am 0H "C mm 10 nu 3M m4 NM M64CM TEARS.***O. **.*0* m,**t* *t~* ~*eh* -~~** e***** *****O* *.*~b* *.g* *.*.*.*. " *.*** ****** i**.**O .e***k

1989 4315.0 1186.0 90.0 6857.0 920.0 168.2 6100.0 1966 2067 1757 19326 19326 0 S04680 261990 4565.0 1252.0 135.0 7157.0 1090.0 168.2 6512.0 20859 2067 16 20671 39M 0 4839 231991 4816.0 1275.1 150.0 7407.5 1123.0 168.2 SK9.0 2089 207 187n m94 60592 0 463335 22199Z SO81.0 1319.7 210.0 7666.8 1156.0 166.2 6803.0 22405 688 2172 23886 60 0 439446 181993 560.4 1365.9 270.0 795.1 1191.0 168.2 6612.0 2903 0 220 25193 10967 0 414253 161994 S55.2 1413.7 330.0 8212.8 1226.0 252.2 69.0 23189 0 2319 2550 135181 0 388746 151995 59360 1456.2 390.0 8459.2 1264.0 252.2 5516.0 2376 0 23 2s60 16075 0 363142 U 81996 6234.9 1499.8 450.0 6713.0 1301.0 612.2 5345.0 241S6 0 2416 26571 1873ss 0 336571 131997 6546.6 1544.8 S10.0 8974.4 1340.0 612.2 S568.0 25416 0 25i 2J956 215313 0 308613 111996 6806.5 1583.5 570.0 9225.7 1380.0 612.2 5585.0 25765 0 2576 26341 243654 0 280272 101999 7080.6 1623.0 630.0 9484.0 1422.0 612.2 5623.0 26475 0 2646 29123 2727m 0 251149 92000 7364.1 1663.6 690.0 9749.S 1465.0 612.2 6288.0 27642 0 27d3 30616 3i3392 0 220534 72001 7s55.0 1713.5 717.6 9944.5 1479.7 612.2 6018.3 28071 0 2607 30678 334270 0 189656 62002 7812.6 1764.9 746.3 10143.4 1494.4 612.2 6018.3 28592 0 28S9 3145 36572M 0 158205 S2003 6047.0 1817.9 776.2 10346.2 1509.4 612.2 6018.3 29127 0 2913 32040 397761 0 12616S 42004 8288.4 1872.4 807.2 10553.2 1524.5 612.2 6018.3 29676 0 2968 2644 430405 0 93521 3200S 8537.0 1928.6 839.5 10764.2 1539.7 612.2 6018.3 30240 0 3024 33264 463669 0 60257 22006 6793.1 1986.4 873.1 10979.S 1SS5.1 612.2 6018.3 30818 0 3082 33900 497568 0 26358 1

OQ s

00

0 .elI,-

OD

886131IVA GAS SECTOR 51W?

OMM PROECTI LIGN S21A830)mcmsmUIPOTEUS 16 OTM SUE SWI SVU 504600tolollf NOE *UI,ESIS via -o 90

PETUCOI M 1 9IS WN 181 xi s" mm 0PUEZ 1N36 IML 2018 (M1IS1SO 1513311) * IAIT 4 in

0mJSTu1 2 axi" FLOAUEL 10 X

lmsESc aNE l mRASPORTu R RUEtX suuc m mE OAL AL noBR INTEIIAL ouM isv RaNA16 ISV/RMOUSE USE USE USE use UN on Comm RllTS USE PROD PRMS O0E RESERVES 311D

11*3 mm6C 161 iM a KNW= NC MUM NM0 EE 161 16W gR 16u0 Wu6C 3610 Wm0 Wu TEAR* . ** .**_*e .a*-.. **** *... * o.**" .a. ." *..a. *a.a.. *..eaa ete*a .a..a .a.... a...... *.e.... ... **"

199 478.0 1222.0 ".0 7M.0 920.0 166.2 6.0 235 2067 1830 20123 20128 0 5600 251990 473.0 1269.0 135.0 7429.0 1090.0 166.2 74.0 2236 27 2032 225 42480 0 462248 2219M 5014.4 1313.4 150.0 m4.9 1123.0 245.6 6130.0 216 20 192 21W 4067 0 460661 211992 5290.2 6359.4 210.0 79#4.9 1156.0 1337.6 6651.0 24189 689 2350 2OO 89917 0 434811 171993 S501.2 1406.9 270.0 W264.4 1191.o 137.6 101.0 25152 0 2515 27667 1175 0 40n744 1s1904 S888.1 1456.2 330.0 S553.6 1228.6 133A.6 "65.0 RS487 0 2S49 2605 145620 0 3791O0 149 ff 6182.5 149.9 390.0 8810.2 1264.0 1578.6 6699.0 2MM24 0 2642 2906T 1m686 0 350042 12 co

1996 6491.7 1S44.9 450.0 9074.6 1301.6 1576.6 651.0 27392 0 2739 30131 204817 0 319911 111997 6816. 1591.2 510.0 9346.8 1340.0 157.6 673.0 27956 0 2796 30751 235569 0 2891S9 919I 7088.9 1Ul.0 S70.0 9608.S 138.0 1578.6 8190.0 30847 0 3005 33052 268620 0 256108 a1999 372.5 1671.8 630.0 981 .S 1422.0 1578X6 9567.0 32119 0 3212 3S331 303952 0 220776 62000 7667.4 m13.6 690.0 101S4.1 146S.0 1S78.6 H1O48.0 34317 0 3432 3774 341700 0 183028 S2001 7091.4 1765.0 717.6 10357.2 1479.7 1S01.2 12466.0 36184 0 3616 39602 381503 0 143226 42002 8134.3 1618.0 746.3 1056.3 1494.4 1581.2 13964.0 382 0 322 42045 423547 0 101181 22003 8378.4 172.5 776.2 1o05.6 1509.4 1501.2 15549.0 4032 0 4036 4398 46796 0 5672 I2086 8629.? 1928.7 807.2 10991.1 1524.S 1501.2 1M3.0 42685 0 4261 46166 514812 0 916 0

000 .

o -

r0

- 88 - ~~~~Annex 7.1

-88- Page2igts- 5 of

g l$l - 8- …- i ---

s X------…-------

i ! ii Iig 'Iiit=t2X

I i

||| '3ili§llil§l§ii~~~~ _"** Uf$f6aS


Averge Ineramital CostNW ept HighScario A

Nuqm kwtrst emtoe Vaimn Atratshlatw Ondwe Dow 0OeS8

Exptoration 6.00 7.50 12.00 8.00 10.50Prouietion 9.45 7.35 18.21 11.46 8.3SPit Trnsport 13.29 29.67 16.92 U.29 29.6?

City CGte 28.74 44.52 47.13 32.75 48.52

DistrfbitionResidentiat 48.30 48.30 48.30 48.30 48.30Carcitl 46.20 46.20 46.20 46.20 46.20Gent. Ind. 4.12 4.12 4.12 4.12 4.12

X of Proved/Prob/Poas ReVS 4;.6 18.2 26.8 12.3 0.1

Avg city gte cuot 37.05 $I/IM 1.05 S /Cf

AIC for Rstidential 85.35 S/imS 2.42 S/HCf

AIC for corfetl 83.25 5/HM 2.36 S/NC?

AIC for geefral iniastry 41.17 S/HCM 1.17 S/FC

AIC for Cmnt 30 - 50 S/HIM 0.85-1.41S/NC?

AIC for poer 38.08 S/wCx 1.08 $/NC?

AIC for fertilizer CHapuun) 17.45 SiN 0.49 S/NCF

AIC for Nthanol CT dsl fueo) 16.85 S/M 0.48 S/HCF

'Varies for each loction.

-90 - Annex 7.1Page 7 of 8

Average Incrumuitat Cost

Swmarfo I

auqumn Austrat Noroaste V quen 1ustra1Sbelleo Owhore Doep OmqpY/S

Exploration 6.00 7.50 5.87 8.00 10.50Productifn 9.45 7.35 18.21 11.46 8.35P/L Tr aport 13.29 29.67 16.92 13.29 29.67

City Gate 2L.7 44.52 41.00 32.75 48.52

Distributi nResidwnttat 4.30 48-30 48.30 48.30 48.30Comci eat *6.20 *6.20 46.20 46.20- 46.20Gamt. Ind. 4.12 4.12 4.12 4.12 4.12

5 of Proved/Prab/Poa Rav 42.6 15.7 26.8 12.3 2.6

Avg city gate cost 35.51 S/MW 1.01 S/Ncr

AIC for Rasfdmntial 83.81 $/UM 2.3? S/NCF

AIC for cmuuAreial 81.71 S/NW 2.31 S/ncf

AIC for gamrsl Industry 39.63 S/NOW 1.12 S/NC?

AIC for C e nt 30 - 50 S/1CN 0.85-1.415/NCF

AIC for power 36.54 S/NC 1.03 S/NCr

AIC for fertilizer (Mequen) 17.45 $/1NM 0.49 S/NCF

AIC for Nethanot (T del Fuesgo) 16.85 S/NCN 0.48 S/NCF

*Varias for each Location.


- 91 -

Avrge Inc.wmtel CostNW empL NighSceurfo C

lNem Autrat lNoreste Isian AustratShittu Or_hwe Ocp OeeplOS

bElpatf on 6.00 7.50 12.00 8.00 10.50Proaition 9.45 T.35 18.21 t;.46 8.35.P/L Trnport 13.29 29.67 16.92 13.29 29.67

City Gat* 28.7 44.52 47.13 32.75 48.52

SfstrfbutionRinidtial 48.30 48.30 48.30 48.30 48.30C_erclal 46.20 46.20 46.20 46.20 46.20Gent. tnd. 4.12 4.12 4.12 4.12 4.12

I of Prvvd/PrbPo cn 42.6 15.7 33.0 0 8.7

Avg city gate cot 39.01 W/MU 1.10 SimC

AIC fwr RSientlat 87.31 S/U 2.47 S/C

AIC for cuusiciat 85.21 $/NOB 2.41 $/PC?

AIC for gehat irnmtry 43.13 S/o= 1.22 SIND

AIC for Cmmt 30 - 50 S/ 0.85-1.41S/N

AIC for power 40.04 S/M 1.13 S/NCF

AIC for fertilizer (Nlln) 17.4! S/MNO 0.49 S/NCF

AtC for Nethanot (T dot Fuese) 16.85 S/MlC 0.48 S/NCF

-varies for each Location.

Annex 7.24%Page I or 6

- 92 -

NETBACK VALUE CALCULATIONS FOR GAS

1. The net-back value of gas for residential use is the cost ofalternative fuels which are used in markets not presently served by naturalgas. GDE uses the following consumption pattern to calculate the economicfeasibility of extended gas service to new areas: propane 25Z; butane 11 S;kerosene 44X, fuelvood 20X. It is anticipated that the use of fuelvood andkerosene will decline and the use of LPG will increase. The percentageshave been adjusted to reflect the trends and the values used to calculatethe net-bock vale are: LPG - 50Z; kerosene; 402; and fuelwood 102.Therefore, the net-back value is most sensitive to the price of LPGs. Atthe present time Argentina's LPG sspply and demand are closely balanced soit is reasonak'le to use the export value of LPG as the economic value inthe local narket. The cost of bottling LPG must be added. As of December1, 1988 the bottler's margin was estimated to be approximately $135 per ton(based on an exchange rate of 14.5). Based on an export value of $100 perton, the economic value of LPG is $235 per ton. GDE's estimated cost ofkerosene is $162 per ton and the market price of fuelwood is $75 per ton.The unit value must be adjusted by the combustion efficiency relative tonatural gas. The relative efficiencies which have been used are: LPG -100Z; kerosene - 80?: fuelwood - 50Z. Based on these economic values andfuel use efficiencies. the net-back value of natural gas in the residentialmarket is $200 per MC0. A similar procedure was used to calculate the net-back value in the commercial and general industry markets. They are:commerciallinstitutional - $203 per MCM; general industry - $121 per MCM.

2. The net-back value of natural gas for power generation is theamount which could be paid for natural gas which would result in the sameincremental cost for electricity delivered to the Buenos Aires market asany other alternative source of supply to meet the incremental demand. Inaddition to hydrocarbons, hydropower and nuclear energy are also availablefor power generation. As the nuclear options are likely to be moreexpensive than hydro in the foreseeable future, the net-back value ofnatural gas for power generation could be based on hydroelectric projectnow under consideration. A large number of hydro projects have beenevaluated at the prefeasibility level but the estimates of project costsare uncertain. The 250 MV Pichi Picun Leufu hydroelectric project is theonly project for which e final design has been prepared and a constructioncontract has been negotiated. There may be less expensive -- larger --projects among those examined, but Pichi Picun Leufu was selectqd as thebasis for estimating the incremental cost because firm cost estimates wereavailable. Based on current estimates of the construction cost and theprojected load factor, the generating cost is estimated to be $0.047 perkwh. The cost of transmission from the site to Buenos Aires would be aboutS0.004 per kwh. resulting in a delivered cost of $0.051 per kwh. Anequivalent gas-fired thermal station would consist of a 150 mw steam unitand a 100 mw simple cycle gas-turbine unit. The net-back value of naturalgas used in such a station, located in the Buenos Aires area, would be $79per HCM ($2.23 per MCF). The technology used to estimate these valuesmeets the development criteria currently used by the Secretaria de Energia.It should be noted, however, that the Secretaria de energia is consideringthe installation of combined-cycle plants which could have capital costs asmuch as 25? lower than stiam plants and operate at 10 higher efficiency.

9 3 Annex 7.2(8)Page 2 of 6

This would reduce overall production costs and increase the net-back valueof natural 8as as a power plant fuel. The detailed analysis of the net-back calculation is presented in Annex 4.

3. The net-back value of natural gas when used for fertilizer(ammonialurea) manufacture is the price which could be paid for natural gas

which would result in a lower manufactured cost than the price of importedurea. The net-back value is affect by the unit investment per ton ofproduction, the cost of operating labor and utilities, but most directly bythe value of the urea produced. The World Bank International EconomicsDepartmenc has projected that international urea prices will increase, inreal terms, until 1990 but decline thereafter until 2000.(l) Based on.heir projections of real urea prices, plus the cost of transporting ureafrom the U.S. Gulf Coast to the Neuquen area, and the operating factorsestablished for the Fertineu project, the net-back value of natural gas isestimated to be $45 per MCM ($1.28 per MCF). However, the net-back valueis very sensitive to the international price of urea. If the price shouldincrease 252 above the World Bnk projected level, the netback value wouldincrease to $88 per MCM. The net-back analysis is detailed in Annex 5.

4. Cement manufacture. The cement industry is well established inArgentina. Eight manufacturers operate a total of 41 kilns -i all regionsof the country except the far southern zone. In the early 19808 capacitywas rapidly expanded but demand and production have declined in recentyears so the industry currently is operating at about 522 of capacity.Natural gas is the most commonly used fuel, providing approximately 63Z ofthe fuel requirements. Oil is used in most of the other plants and smallquantities of coal are used. Coal would be a preferred alternative fornatural gas if it were available at an economic price. Coal production isvery limited and it does not appear it would be an economic substitute.The other alternative fuel would be heavy fuel oil. Based on the 1987export realization price of $102 per ton, and estimated freight costs of$10 per ton, the cif price of HFO would be $92 per ton. Some of the plantsare already equipped to use fuel oil so the added cost of equipment wouldbe minimal, primarily for storage equipment where it was needed.Therefore, the net-back cost of natural gas for cement manufacture isconsidered to be the delivered cost of heavy fuel oil, $92 per HCM ($2.30per MCF).

5. The largest petrochemical projects -- iD. terms of natural gas use-- which is included in GDE's high demand scenario is a methanol plantwhich would be built in Tierra del Fuego. It would be approximately thesame size as the recently commissioned plant at Punta Arenas, Chile. If along term market can be established for the output as a chemicalintermediate, the net-back value of the natural gas feedstock may besufficiently high to cover production costs. However, long term marketprospects for methanol use as a chemical intermediate are uncertain. 7herewill probably be a large market for methanol as motor fuel when enginetechnology is improved and the marketing infrastructure is in place. Inthis market the price will be set relative to gasoline prices and atcurrent prices, the net-back for a methanol plant would be negative. Inthe early 1980s Argentina exported small quantities of methanol at pricesexceeding $200 per ton but in 1986 the export realization price was $175per ton. At that price the net-back value is $4 per MCM ($0.11 per MCF).

- 94 - Annex 7.2t4)Poge 3 of 6

If the export price reaches $250 per ton, the net-back value would be $18per MGC ($0.52 per MCF). In view of the market and pricing uncertainties,the net-back value used for economic evaluations should be no greater than$15 - 25 per MCM.

6. The net-back value of natural gas liquids as feedetock for chepetrochemical industry is a function of the product, the cost ofextraction and the cost of the alternative feedstocks. The net-back valuefor the ethane extracted from natural gas is $81 per ton and for LPGs it is$88 per ton. The economic net-back values for each of the principalconsuming sectors are listed below.

Net-back Values

Net-back value

Sector$/Mc14 $IMCP

Residential200 5.67

Commercial203 5.74

Genl. Industry121 3.43

Cement99 2.80

Power79 2.23

Fertilizer45 1.28

Petrochemicalz0.480/Mcal l.91ImMBtu

Annex 7.2(a)95- Page 4 of 6

NETUAC vALI at unmAlJ uAs PUPam3 GIaURtIS

IRTIoM COST FM P1CM! P10 l tSufu KWIC

111 2 16$ U HILL CAPACIT Z0 NW01 0 2 S OPONI s*w.ll

oamm a x2I UT I ""ASWI 4 MILLAKWo* 0 r x 1t 6 2 LOAT 4.50 XOUM 16 2 IN a 3 NY= 179515313 2SIN61ye WPNW 38160VA a0 s 1N131 M 5 46.8 NILLIIOONAWII 1216 13uYR6ODA"U 112ZIhy? A tSF I0 0.12

O-ITIS tlo TOTAL mCOST a COST COST GEunETED

VM MILLS NILLS MILLS MILLS SM***o *Oeea _** 6*"***

1 5.27 5.272 15.45 16.453 42.10 42.104 n.Si 73.51S 52.2n 52.n6 42.18 42.157 29.00 29.009- 01. 75 4.05 4.63 1020.:0

9 0.75 4.06 4.6 1020.1010 0.75 4.06 4.8 1020.1011 0.75 4.06 4.3 1020.10

0.75 4.08 4.3 1020.100.75 4.00 4.83 1020.10

14 0.75 4.06 4.83 1020.1015 0.75 4.06 4.63 1020.1016 0.75 4.06 4.63 1020.1017 0.75 4.06 4.63 1020.101 0.75 4.08 4.63 1020.1019 0.75 4.06 4.63 1020.1020 0.75 4.40 4.3 m 1020.102t 0.75 s.0o 4.63 1020.1022 0.75 4.06 4.3 1020.1083 0.75 4.06 4.83 1020.1024 0.75 4.6 4.8 1020.1025 o.7 4.03 4.3 1020.102 0.7 4.0 4.83 i020.102 0.75 4.06 4.83 1020.1028 0.75 4.08 4.83 1020.1029 0.75 4.08 4.83 1020.1030 0.1 4.08 4.83 1020.1031 0.7n 4.06 4.83 1020.1032 o.n 7 4.0 4.u3 1020.1033 0.75 4.00 4.83 1020.1034 0.75 4.08 4.83 1020.1035 0.75 4.08 4.83 1020.1036 0.7n 4.08 4.83 1020.10ST 0.75 4.08 4.83 1020.1038 0.75 4.08 4.83 1020.10

Annex 7.2(a)-96- Page 5of 6

NuTM vYA OF NATURUL GU M

CURSEC S OUE3I CTM of PICUI P103 POJC)

STIWCST 1100 U311 sTCAp ISO WJ STnIII a001U MCA,,,,sv I0, NILL U seiuFc 62.76 1v-mi 400 uwSa TISA IceKN TUNTTI tn M ui0i,inmtw 40 ToFCTW 2.3 xTOTASIV 205 TOtW 2

Inc 0s OPCOS 13.2 *MW-TlN W8 0COIU 20 X1I Ye I 1*A3 0 N'IS ON 02O LRIOI 40 X 1in 2oAMS to x n13 0 3 4K NILLIW

kYAL 2.3418 U

OlIJACTOS 0.12

PTINS TRAIIWt Pm m1 FUEL TOTAL1N11S c cWT WIT ERTUD iN cm COST

YUAM ILLS tILLS PILLS WA MILL IU MILL MILL I

1 41.0 41.0a U82.0 U.03 41.0 41.0s 3.3 0 1020 6941507. 21.0 24.35 3.3 0 1020 6941507. 21.0 24.34 3.3 a 1020 6941507. 21.0 24.37 3.3 0 tOOO SR1"07. 21.0 24.3a 3.3 0 I100 1WM. 21.0 24.39 3.3 0 10o 64150. 21.0 24.*

10 3.3 0 1020 6941W. 2123 24.311 3.3. 0 1020 6941SO7. 21.0 24.31t 3.3 0 1020 6417. 21.0 24.313 3.3 0 1020 8941507. 21.0 24.314 3.3 0 1020 694150?. 21.0 24.3Is 3.3 0 1020 69150. 21.0 2.316 3.3 0 120 91507. 21.0 24.317 3.3 *0 1020 891O7. 21.0 24.31l 3.3 0 1020 691507. 21.0 24.319 3.3 0 1020 894107. 21.0 24.320 3.3 0 1020 6o150. 21.0 24.321 3.3 0 1020 61507. 21.0 24.322 3.3 0 1020 6941507. 21.0 24.323 3.3 0 1020 941507. 21.0 24.324 3.3 0 1020 8941507. 21.0 24.325 3.3 0 1020 8941S07. 21.0 24.326 41.0 3.3 0 1020 941507. 21.0 65.327 a2.0 3.3 0 1020 6941507. 21.0 106.32 41.0 3.3 0 1020 641507. 21.0 46.329 3.3 0 1020 64150. 21.0 24.330 3.3 0 1 6941507. 21.0 24.331 3.3 0 1020 94107. 21.0 24.332 3.3 0 1020 941s507. 21.0 24.333 3.3 0 1020 941507. 21.0 24.3

Annex 7.2(a)97 Page 6 of 6

UETRACK VALUE CALCWITIPI

AMIONIAIURE KFACTURE

ELINCR 2 WU AFE 2000 FEIGUT 30 STOMUWICEU 200 S/TON (CULFCA) INVESMHT 750 SON/YRGRSUSE 40 NCF/TON CAPACITY l,000 TPOOPAIOR 2.28 NILL * emSw 5 HILL SPRCONS 300 KWINTON INVFACTOR IPURCOSI 0.04 S/1IH ODRWIY1 20 X

UTIL 2.00 S/ToN Dr0IY so XDlSCCT 0.12 0RWSWiR 30 SNETUAL 1.26 S/NCF 45 SC NPYPRtS 531660.2

tRI 12.0 X NPVT 103.8194

COST CT TOTIWT UlFA URA SALS COST TOTAL W.TtWISTMT OPCOST EXfOSTOCK PRCO PRICE REWVIU VAT GS COST REWEOU

YUA iISSLL USSLILL USINILL TON/Il S/N ILL S UuSNILL USUNiLL -US".LL

me. - .me. m_n e.m mm O o m

I 15.00 15.00 230.00 0.00 15.00 -15.02 37.50 37.50 212.00 0.00 37.50 -3.5.3 22.50 22.50 215.00 0.00 22.50 -22.5

4 3.65 3.68 100000 209.00 20.90 5.12 8.80 12.1

5 3.66 3.66 100000 204.00 20.40 5.12 8.80 11.66 3.66 3.68 100000 199.00 19.90 5.12 8.80 11.1

I 3.6 3.68 100000 194.00 19.40 5.12 8.80 10.6

8 3.6U 3.66 100000 190.00 19.00 5.12 8.80 10.2

9 3.66 3.68 100Q00 168.00 18.80 5.12 8.80 10.010 3.66 3.66 100000 186.00 18.60 5.12 8.80 10.011 3.6 3.66 100000 164.00 18.40 5.12 8.80 9.6

12 3.66 3.6 10000 187.66 1.77 5.12 8.60 10.013 3.66 3.68 100000 191.43 19.14 5.12 8.80 10.314 3.6 3.66 100000 195.26 19.53 5.12 8.60 10.715 3.66 3.66 100000 199.17 19.92 5.12 8.80 1l.1

16 3.68 3.68 100000 203.15 20.32 5.12 6.80 11.517 3.68 3.66 100000 207.21 20.72 5.12 8.80 11.918 3.66 3.66 100000 211.36 21.14 5.12 8.80 12.3

19 3.6 . 3.68 100000 215.59 21.56 5.12 6.80 12.8

20 3.68 3.66 lO00 219.90 21.99 5.12 6.80 13.221 3.66 3.68 100000 224.29 22.43 5.12 8.80 13.6

22 3.6a 3.66 10000 226.76 22.86 5.12 8.80 14.123 3.66 3.66 100000 23.36 23.34 5.12 8.80 14.5

Annex 7 .2 (b)Page 1 of 7 - 98-

Petrochemical sector

Although a wide range of chemical intarmediates and finishedproducts are manufactured in Argentina, almost all of the natural gas andnatural gas liquids (NGLs) used In the sector are consumed to produce fourbasic chemicals: a_monia, methannl, ethylene, and propylene. The principalderivative chemicals are urea which is produced from ammonia; and plasticswhich are produced from ethylene and propylene. Methanol is used toproduce resins and solvents. Three different petrochemical feedstocks arederived from natural gas. Residual natural gas, from which natural gasliquids (NGLs) including propane. butane and heavier hydrocarbons have beenextracted, can be used as feedstock for amuonia and methanol production.Wets can be used to produce intermediates such as ethylene, propylene andbu- lene. However, ethane is the preferred feedstock to produce ethyleneand several of the proposed projects will be designed t-o extract ethanefrom the gas stream along with the heavier hydrocarbons.

As of January 1, 1987, avmonia was produced by threemanufacturers. Petrosur SA operated a plant with an installed capacity of72,000 TPY at Campanas D.G.F.M operated a 12,000 TPY plant at Rio Terceroand Electroclor operated a small plant, using electrolytic hydrogen. atCap. Bermudez. Approximately 702 of the ammonia is converted to urea byPETROSUR SA at a 103,000 TPY plant at Campana. Production in 1986 was75,733 tons, indicating a plant atilization factor of 872. Urea productionin 1988 was 91,942 tons and the plant operating factor was 89S. Smallquantities of urea are exported but larger quantities are imported.

Ethylene is produced from light naphtna and refinery gases but 782of the conversion capacity is at the Petroquimica Bahia Blanca SAIC plant,which utilizes ethane feedstock. Total installed capacity is 255,000 TPYbut in both 1985 and 1986, production was 261,000 TPY, exceeding plantcapacity. Essentially all of the output is used to produce polyethylene.Propylene production for petrochemical use was 33,700 tons on 1986. Inaddition to the 20,000 TPY P.B.B. SAIC plant, YPF has a 48,000 TPY plant atEnsanada and a 20,000 TPY plant at Lujan de Cuyo. Two smaller plants areope;-ated by Shell CAPSA and Esso SAPA. Two -mmll methanol plants produced33,00 TPY in 1986. ATANOR SAM operates a 1..000 TPY plant at Rio Terceroand CIA. CASCO SAIC operates a 21,000 TPY plant at Pilar. Three-quartersof the methanol is used to produce formaldehyde and the balance is used forsolvents. Less than 102 was exported and a small quantity was imported.

Ax part of its program to expand the use of natural gas, thegovernment has encouraged growth of the petrochemicals sector. A number ofprojects have been proposed but it is unlikely all will be realized. Thepetrochemical industry has identified 18 potential petrochemicals projectsbut GDE includes only eight in its Sigh Demand scenario. These wouldprobably be more likely to be built, but even some of these arequestionable. The projects listed by GDE, the volume of gas (or equivalentNaLs) consumed, and the projected start-up date are listed in Table

Table 1. Potential Petrochemical ProjectsNG Use

Project Location MKQY Start-up

- 99 - Annex 7.2(b)Page 2 of 7

P. oral. Mosconi Bahia Blanca 43 1989Acrylonitrile Neuquen Neuquen 77 1991Resinfor Santa Fe 119 1992AsMonia (local use) Pta. Loyola 241 1992Petroquimica Austral Tierra del Fuego 648 1992Fertinoa (Fertilizer) Noroeste 42 1992Fertineu (Fertilizer) Neuquen 42 1992Ammonia Bahia Blanca 241 1995

If these projects were completed as scheduled. total 8as consumption in thesector would increase more than ten-fold from 125 MKCMY to 1,579 UMCHY butwould still represent only about S of total consumption. Over the life ofthe projects they would consume approximately 72 of the proved reserves(504.6 BCM).

The pricing structure for sale of residual natural gas and NGLs topetrochemical manufacturers was revised in 1988 when Resolution No. 105 wasissued. The structure is complex and requires transfers of large amountsof money from the government to the petrochemical industry. Natural gaspurchased for fuel use -- as distinguished from that used as a raw material-is sold at the standard industrial price. The man,ifacturer pays theposted price (the Resolution No. 105 reference value) for each product tothe producer, primarily GDE. However, the manufacturer receives a rebatefor all natural gas, ethane, propone and butane used as feedstock. Therebate is the difference in the retention price established in accordancewith Resolution No. 105 and the reference price. The purpose of thepricing policy is to enable Argentinean producers to campete in worldmarkets. The reference price is the calculated average price. c±fArgentina, for a basket of world prices for each product. After thereference price is established, it is reduced by applying a coefficient'which currently is 0.9 Zor existing plant3 and 0.8 for new plants. Thebasis for applying the lower coefficient is not clear and it is subject tonegotiations between the government and the petrochemical manufacturer.Since the inception of Resolution No. 105 the reference price for ethanehas increased 432; propane, 482; and butane, 422; while the reference pricefor virgin naphtha has remained almost uichanged. Table .2. lists, thedifferences between the retention prices paid to the .4pplier and thereference prices established under xesolution No. 105 as "i September 1988.

- 100 - Annex 7.2(b)Page 3 of 7

Table Z. Feedstock PricesSeptember 1988)

Retention ReferencePrice Price Differenoe

Feedstock S/Ton S/Ton S/Ton_ ~ -

Virgin naphtha 187 106 81Propane 162 62 l00Butane 162 55 107Ethane 146 56 90Natural gas 60 (per MCM) 30 30

Based on the volumes of each product sold in 1987, the implied transferpayments made by the government to the petrochemical industry would be $115million.

The pricing structure for NGLs used in the petrochemical industrywili undergo a significant change as the new projects come on-stream.Rather than GDE extracting the heavier hydrocarbons and selling them to themanufacturers, the manufacturer will receive 'wet' gas containing NGLs fromYPF, process the gas to extract the NGLs including ethane. and deliver theresidue gas to ODE. The current plan, as typified by the Dow project inNeuquen, is for the manufacturer to install the extraction plant and payonly for the 'shrinkage', that is the heavier hydrocarbons extracted andfuel gas, on the basis of the calorific value. For the Dow project thenegotiated price is approximately $21 per MCM ($0.60 per MCF).

Historically in world markets, NGL prices have exceeded naturalgps prices (on an energy equivalent basis) by at least a sufficient margiato pay for the extraction cost. If alternative feedstocks, e.,.naphtha,were available at a lower price petrochemical manufacturers would switchfrom NOLa and the producer would shut down the extraction plant. Currentlythat is happening in the U.S. Gulf Coast even though spot natural gasprices are also low.

Ethane is a better feedstock for ethylene production than lightnaphtha because it yields a smaller proportion of low value by-products.Ethane's value can be distorted if higher than market prices are paid forthe co-products such as butylene and propylene. The reference pricesestablished under Resolution No. 105 may be reasonable, but a more flexiblecontractually based arrangement could protect both the seller and the buyeragainst large changes in prices. Based on the 1987 export price fornaphtha -- assumed as the price received for nafta comun -- of $106 per tonplus $10 per ton for freight, ethane's net-back value would be $113 perton. The economic cost of extracting NGLs from the Loma la Lata gas streamis S32 per ton so the economic net-back value of ethane woule be S8l perton, 51.82 per HMBtu. This is equivalent to $62 per SCM or almost threetimes the energy equivalent price. The unit cost of extracting ethanewould be higher than the average cost of $32 per ton because extraequipment is needed to make the deep extraction. Nevertheless, it appearsthe ethane fraction would be significantly underpriced if sold on an energyequivalent basis. This is supported by a recent World Bank study whichfound that:

- 101 - Annex 7.2(b)Page 4 of 7

...countries with access to (N!SLJ feedstock at US$0.60 per MMBtuor less will be able to produce basic olefins with a costadvantage ... For example, ethylene production costs will beabout 302 low"r... compared to similarly sized and efficientproducers in Western Europe or naphtha importing countries such asJapan and S. Korea.02Light naphtha prices are depressed and an international price in

the range of $150 per ton over the longer term may be more realistic. Asshown in table 3., the ethane's value increases as the competitivefeedstock price increases.

Tab-e 3. Ethane Value Versus Naphtha Price

Naphtha price, Slton 11 125 150Ethylene price, S/ton 352 3o 444Ethane value, $/ton 113 134 188Eztraction cost, S/ton 32 32 32Ethane netback price, Slton 81 102 156Ethane netback price-, SIMBtu 1.82 2.29 3.50Percent of energy value 303 380 583

The net-back value is 70 - 802 of the naphtha price while under ResolutionNo. 105 the price of extracted ethane is 852 of the naphtha price. Thisindicates the extraction margin provided by the Resolution may not besufficient to cover extraction costs. If world naphtha prices increase asexpected, the disparity between the energy content based price and themarket value will increase rapidly. A method whereby-YPF could share inthe increasing value of the ethane fraction should be established. If allwell-head and transfer prices are eliminated, as discussed in section 8,the seller would be free to negotiate a market based pricing iormula.Several options for pricing the ethane fraction are reviewed below. Thepropane and butane fractions could be priced in relation to internationalprices and adjusted periodically to reflect changes. This is somewhatsimilar to the present method used for setting Resolution No. 105 prices,but the discount coefficient would be eliminated and an allowance would bemade for the cost of extraction. The pricing parameters, that is thebasket of prices and freight ratea should be updated to reflect currentconditions.

There are several ways in which some portion of the higher valueof NGLS as a chemical feedstock mlght be captured by the producer. Thesimplest would be to increase the price of the extracted components toreflect their value more accurately. The price of ethane could be set onthe basis of lts value as a substitute for light nap1"ia while the price ofpropane and butane would be based on the cif price of imports or the fobprice of exports. Argentina is likely to be a net exporter of LPG so theexport price may be the better basing point. In many countries this isdone through a 'percentage' type contract under which the owner of theliquids receives a portion of the liquids -- or the equivalent value ofthat portion - from the extraction plant operator In the case of the

21 Vergara, Walter and Brown, Donald, The New face of the WorldPetrochemical Sector, World Bank Technical Paper No. 84, Industry andgnergy Series, Washington, D.C., 1988.

- 102 - Annex 7.2(b)Page 5 of 7

Argentine projects, YPF would hold title to the residue gas until itreached the tailgate of the plant and would receive the percentage payment.The residue gas would be sold to GDZ at the plant tailgate. This methodhas the advantage that it is somewhat simpler than the Resolution No. 105procedure and eliminates the transfer payments made by the government.However, it does transfer a portion of the downside risk of falling pricesto YP,.

A second way to capture a portion of the.higher value would be toallow the plant operator to charge a processing fee for extracting theliquids. The price of the liquids w,uld be set on the basis of theireconomic value but the extraction plant operator's return on investmentcould be guaranteed and he would be insulated from the risk of decliningfeedstock prices. This would increase the attractiveness to privateinvestors, but it would require careful monitoring of costs and operationsby a government entity. The risk for the downstream purchasers of NGLswould be increased and therefore they may be somewhat slower to invest incapital equipment.

A third method would be share the benefits of higher feedstockvalue between the producer and the manufacturer by indexing raw materialcosts to the value of the nroducts which in turn would be established bythe free market price of alternative feedstocks. The plant operator wouldretain a portion of the increased revenues, but a portion would flow backto YPF in the form of higher prices or direct payments. One formula whichcould be used would allow the producer to retain all profits until thenaphtha price exceeded a prescribed level, such as 1102 of the base price.When this level is exceeded, the feedstock supplier and the plant operatorwould share the 'excess' profits. For example, if the naphtha price was inthe range of 110 to 1252 of the base price the price of the feedstock wouldbe increased by a factor which was related to its increased value. Theindexing-factor could be set so that the manufacturer retained the largershare of the 'excessw profits. When the naphtha price exceeded 1252 of thebase price the supplier's portion of the 'excess' revenues could beincreased. The exact values would, of course be negotiated prior toproject initiation. This wouAld allow the government to offer low feedstockprices to encourage the petrochemical industry, but provide a means forcapturing some of the economic rent when energy prices increase. Thismethod would require that the transfer price from the extraction plant tothe downstream consumera be adjusted periodically and monitored to assurethat it reflected the changes in market prices of the end-products. Thiscould become complicated as a number of independent but interlockedcompanies would be involved.

The fourth method would be to assure the manufacturer's return oninvestment. This would also require an extensive cost monitoring andregulating system and assurance that the transf- prices charged forintermediate products reflect the actual value. It does have the advantagethat the rate of return could be negotiated at a level which would beattractive to private investors.

Before a new pricing policy can be formulated a detailedevaluation must be made of the long range value of NGLs and the cost ofextraction. The various contractual options should be examined and theipact of each alternative, on the willingness of private investors to

-103- - Annex 7.2(b)Page 6 of 7

commit to construct plants should be evaluated. However, it is possible toestimate the economic value of NGLs which serves as an upper bound for thefinancial price. Based on the -omposition of Loma La Lata wet gas and thedesign criteria for the proposed oxtraction and fractionation plant.498.010 tons of NOL can be extracted from 18 MKCMD of gas. Based on the1987 export price for light naphtha - $106 per ton and LPG - $.20 per ton;and the net-back value of ethane as a replacement for light naphtha - $113per ton, and deducting the coct of extraction and freight, the value ofNGLe is $69 per MCM ($1.95 pe: MMBtu). This is well above the economicproduction cost for Loma La Lata gas, $15.50 per MCM, so a pr ice whichallowed YPF to recover a portion of the economic rent should st 1l1 pcr"tidesufficient incentive to private investors to build the extraction pla.ut.

Proposals have been made to construct export-oriented methanol ormethyl-tertiary-butyl-ether (MTBE) plants using methane (dry natural gas)as the principal feedstock. The future market price for these motor fuelrelated products is uncertain and it mav be necessary to offer a lowfeedstock price at the outset in order to iustify construction. However.the natural gas sales contract should incorporate provisions which wouldenable the supplier to share in the benefits of higher market prices forthe products if they occur. A formula similar to that proposed for theNGLs, under which the price of the feedstock would be related toalternative feedstock prices might be used. This would require that aninternational pricing base for natural gas used as feedstock beestablished. The procedure would be complex and would not necessarily meetthe requirements for sharing future benefits. Since the risks and benefitsin this instance are market oriented it would be better to key the price ofthe feedstock to the value of the product. The reference price of naturalgas used to produce nitrogenous fertilizers is based on a similar indexingmethodology. Another way would be to negotiate a-feedstock pricing formulawhich provides sufficient inducement to the owner to make the initialinvestment, but provide that the gas supplier share the increased revenuesif the international price of the products increase. The negotiated priceformula would have to be tailored for the needs of all the parties andwould be unique for each project but some similar type contracts haveprovided for three or more price levels over the life of the project:

I. The early market development period, 2 to 4 years. during whichthe gas price would probably remained fixed to assure theoperator's income until a market is established.

Il. Project amortization period during which the owner wouldrequire assured cash flow to service debt a.ad amortize theinvestment. Typically this period may be 8 to 10 years. Duringthis period the gas price could be indexed to the value of theproduct(s) so that the 'excess' revenues, would be shared betweenthe owner and the gas supplier, with the larger portion stillbeing retained by the owner. The gas supplier would require afloor price for natural gas. probably the initial price, unlessthey chose to accept some risk in return for a higher share of theexcess revenues.

III. The profit period which would cover the balaee of theproject life. The gas price would be indexed to world prices for

- 104 - Annix 7.2(b)Page 7 of 7

products and the supplier's share of the excess revenues would behigher than during Phase II.

The contract could also include a rwversionary provisirn whereby ownershipof the equipment and facilities would revert to the gas supplier. or morelikely to a governmen.--owned enterprise, at a time certa.ta. The ownerwould seek to extend the period. but a 20 25 year period would bereasonable.

Annex 7.3Page I of 1

- 105 -

LPG Production by Source

Table 7.1 LPG Prodwetion

Location Source Ownership Production

Chaco Bayo Nat. gas YPF 16.000Campo Duran Nat. gas YPF 107,000*San Sebastian Nat, gas YPF 68,000Lujan de Cuyo Nat. gas YPF 101,000La PLata Nat. gas YPF 41,000El Condor Nat. gas YPF 7,000Carl Cerri Nat. gas GDE 395,000Caimancito Nat. gas GD! 18.000Centenario Nat. gas CDR 12,000Canadon Seco Nat. gas CDs 9,000Lama La Lata Nst. gas CDE 117,000

From natural gas 784,000

YPF Refinez) 191,000Esso SAPA Refinery 77,000Shell CAPSA Refinery 23,000PASU 20,000Oral. Mosconi Petrochemicals 30,000Duperial Petrochemicals 8,000

From petroleum 349.000

Total production 1.097,000

*Equivalent red.livered for petrochemical feedstock.

Anne,- 7. 4-106- Page I of 2

Methodologv for Calculatina Financial Costs

195. The methodology adopted for calculating the financialcost of gas exploration and production adheres, as closely aspossible, to the methodology used by the Secretaria de Energia.However, the SdE calculated the rate of return for developingeach field, based on assumed values for the gas and condensateproduced. In order to calculate the cost of producing the gas,the calculating procedure, but not the underlyJng methodology,had to be modified. The well 4 rilling costs, production razesand the values for the other technical parameters for basinswhere there has been little or not experience, e.g. the DeepMeuquen. were estimated by the B3ak' s technical consultants. TheValues for the economic parameters were adapted from the valueswhich are beint, used ln the study now being conducted by theArgentine Petroleum Institute, except that the royalty allowancewas modified. In order to simplify the computation, it wasassumed that the condensate value would be equivalent to thevalue of the natural gas. The condensate value may be 20 - 40?higher than its production cost, depending on the quantity ofnatural gas liquids produced. and the production cots. However,if all drilling and recovery costs were allocated to NGLproduction, the cost of production would be higher than theaverage production costs. As calculated, the cost of natural gasproduction is probably slightly overstated.

196. The capital and operating costs required to develop andproduce natural gas were estbi ted for one field in eachproducing basin which is felt to be typical of fields in thatbasin. Technical and economic parameters were estimated for two,as yet non-producing basins, the Deep Weuquen and the AustralDeep and Offshore fields. The costs were amortized over theproducing lifetime of the field on a unit of production basis. Acapi;al tax rate of 1.5? per year of the yearly -et earnings anda revenue tax rate of 2.5? were used. The Vk'r ^a calculated as15? of the investmnt in any year and amortimr- 'ver the life ofthe field. At present YPF recovers only 30? of the VAT so theunrecovered VAT (702) was included in the cost of production.The royalty was calculated as 122 of the reference price fornatural gas. The natural gas reference price as- calculated as602 of the crude oil reference price, which in this Instance wastaken as $15 per barrel. The gas production cost was based on1002 equity financing and an income tax rate of 332. TheArgentine Petroleum Institute had proposed to use a debt/equityratio of 60140 with 70? of the debt financed in the internationalmarket of 13 2, and 30 Z local financing at 30 2. LeveragedfinancIng could reduce the production somewhat, while stillyielding the desired 30? return on equity, but because of thehigh interest rates, the impact would be limited. After thegross income was calculated, a wlevelized' cost wss calculated asthe constant price which would yield the same present value asthe varying revenue streom, when discounted as 122.

- 107 - Annex 7.4Page 2 of 2

197. ?he financial cost of transmission and distribution wascalculated on the basis of Gas del Istado's estimates of theircosts over the next five year period. The costs include wagesand salaries, taxes, aon-recoverable VAT, operating costs,amorsiz:tion, incarance, interest, capLtal taxes and Incometaxes. The total cost of service was allocated betweentranmission and distribution using the allocation factor, 722,which wag supplied by Gd. The distribution costs were thenallocated among the classes of service, i.e.residentiallcomuercial and industrial, oan the basis of theinvestment required to serve each customer class, the operatingcosts required for customer service, billing. etc., and thevolumes sold to customers in each class.

- 108 -

AN * .1

Pe. 1 oI 1

(FILEsDEMANDI)ARGENTINA - ENERGY SECTOR STUDY - POWER SUB-SECTOR

OEMAND PROJECTIONS - TOTAL COUNTRYSCENARIO: SE'e Energy Plan. GDP Crowtht 8.51 for 1989 *nd 4X p.s. for 199062066

[-Consump--------consumption from Public Utilities- I Auto- '.tal Country(--Total-- prod- Consumption

Residential Coomenciel Industrial Others Annual uvers AnnualYoor (iWh) I (GWh) X (GWh) X (Cwh) X (CUb) Growth (CUb) (4Ch) Growth(S)

1970 4996 86.2x 1882 18.8X 4933 85.71 20a9 14.6X 18799 4681 184861976 6621 82.4s 2282 16.91 8856 48.51 2686 18.1X 26416 6.21 4548 24966 6.211980 6M61 80.1X 8160 10.71 18658 47.06 8567 12.2X 29451 7.61 8W 83886 6.MS1981 6959 0.611 3242 11.It 18276 46.6X 8689 12.51 20116 -1.1X 8479 82595 -2.2X1962 6649 29.2X 8122 16.6OX 1404 47.41 8756 12.61 2056o 1.6X 569s a8a81 1.5X196 9s84 28.7x 8826 16.61 15227 48.8X 3988 12.51 1626 6.6X 8M6l 86461 7.211e4 057 20.0x 8556 10.71 15904 4.111 4049 12.2X 8866 4.9s 4100 87186 4.611965 9746 29.7X 858 16.SM 16456 47.11 4060 12.41 a2624 -4.6X 8579 86468 -2.1X1986 10460 2.41 8n77 10,6X 16698 47.6X 4878 12.81 85665 8.2X 34 8S084 64.111967 11326 29.61 4184 16.9X 17911 47.2X 4614 12.11 87064 7.05 8893 41677 6.411966 11744 86.ax 4162 11.6X 17971 46.41 48U 12.X1 38760 2.06 8802 42652 1.911989 18267 83.6X 4896 16.9x 17065 48.1x 4928 12.61 80554 2.6X 42865 48689 2.651960 ' t 8 a2.21 4481 10.41 19641 45.41 5262 12.06 48252 0.1 4466 477)0 8.sx1991 f65 81.21 4787 16.1X 216S6 46.91 5486 11.71 46718 6.61 4610 51826 7.6019m 15224 86.41 5656 M6.1X 289sa 47.61 5624 11.61 60048 7.11 4066 54726 6.6x1998 156C 29.7x 5469 16.1S 28647 46.7X 6172 1.51X a524 7.6X 4756 56262 6.6X1914 165o6 29.03 6706 16.1X 20887 49.41 6504 11.41 56657 6.2X 4823 61680 5.611996 17185 26.41 6147 19.2X 86261 56.11 6646 11.81 69860 6.21 464 65278 5.6911996 17648 27.6x G65 10.2X1 2641 60.81 7215 11.2X 64276 6.41 4989 61209 6.6X1997 16577 27.11 7024 10.2X 5341 51.61. 7607 11.1X 6669 6.71 494 7Sc48 6.8x1996 19838 26.C1 7609 16.81 88146 52.21 8016 11.1 78013 6.51X 562s 7842 6.111999 20126 26.sx 8629 16.8X 41206 58.06 8452 10.01X 7712 6.6X 5651 8286 6.212660 26942 26.2X 8656 10.81 44566 58.7X 8916 16.71 62998 8.71 5659 68652 6S8.

NOTESPorlod 1970-1987: actual dataYear 1966: estimatedPeriod 1986-2000: projections

HOG-11/15/99

- 109-

ANNEX .2

Pae I oft

(FILE:DEMAND2)ARGENTNA - ENERGY SECTOR SIWY - POWER SUB-SECTOR

DEMAND PROJECTIONS - TOTAL COUNTRYSCENAROt: Mobt-Lt kly

GOP 4rowth: 2.06 tor 1989-1994, 8.1 tfor 105-1909 and 43 p.s. for 1997-2166

C---------------eConsumption from Public Ubiliti. .t lAuto- Total CountryR-Total -prod- Consumption

R lenttel Cosneirl Industrial Others LAnnuol ucers AnnualYear (oh) X (Gh) X (Ol) X (oh) X (OW?) Growt (01k) (0t) Growt" ()

1976 4996 86.21 1632 13.31 4903 86.71 266 14u.6 13796 4681 164631975 S662 32.41 22$2 16.91 6665 43.61 268 18.11 20416 6.21 4548 2496 6.21106 6661 30.15 816 10.71 13658 47.61 8567 12.21 20451 7.631 384 338 6.611901 6059 86.6s 8242 11.1X 13276 46.61 6809 12.51 29116 -1.11 8479 8256s -2.211902 6640 20.21 8122 10.61 14634 47.4X 8775 12.6s 29666 1.61 30 8806 1.511068 9084 28.711 U326 16. 16227 48.391 838 12. 5 81520 6.611 981 8561 7.211904 0577 29.0x 8S6 10.71 15904 46.11 4049 12.2X 336O8 4.01 4100 8n7o 4.SX1066 9746 29.711 356 19.51 16465 47.13 4067 12.41 32s24 -o.6x 879 36468 -2.15196 164 29.4n $776 1O.6 16868 47.61 4876 12.31 35565 6.21 34 0a345 6.1X1067 1826 20.6x 4134 10.91 17911 47.21 4614 12.11 87984 7.O6 3698 41677 0.401066 11744 30.81 4162 19.86 17971 46.41 468 12.65 38760 2.10 8692 42652 1.611906 12317 o.61o 4876 19.71 19247 46.91 5126 12.51 4106 6.61 8071 45089 5.611*90 12011 29.90 454 6.ex6 26821 47.1 46s 12.53 48229 6.31 4019 4724 4.91100 18447 29.41 4835 16.6M 21771 47.6 6694 12.41 46747 5.6% 4961 49026 5.511m 13669 20.01 50 10.61 23964 46.61 692 12.51 47986 4.90 419 526" 4.511008 14821 20.61 6878 19.7T 24248 46.21 6826 12.61 56268 4.0% 4119 54362 4.4X1904 14765 20.21 5671 10.81 25362 46.31s O6t 12.71 62466 4.41 4127 56612 4.111006 15815 27.7X 612 1.9.1 26856 46.61 7626 12.7X 65218 5.21 4159 59372 4.951990 1695 27.sx 6861 11.61 28621 40.06 7406 12.7X 56826 5.41 4167 62392 5.151997 16581 26.7X 7096 11.61 89617 40.7x T769 12.61 01961 6.43 4246 6109 6.15190 17202 26.13 7249 11.61 38161 60.41 6220 12.51 65l 6.31 4296 7M15 6.1990 1769 25.5 7741 11.O1 85766 61.01 0674 12.43 70679 6.43 4886 74495 6.1%2 16628 26.611 627 11.15 88676 51.71 9141 12.3 74612 6.51 4366 76076 6.1%

NOTESPoreod 1970-1967: actual dateYear 1.06 estimatedPeriod 1908-20s projetions

HNG-11/15/69

- 110 -

NNEX 68

Page 1 of 1

(FXLE:MEMAND8)ARGENTINA - ENERGY SECTOR STUDY - POWER SUB-SECTOR

DEMAND PROJECTIONS - TOTAL COUNTRYSCENARIO: Low. GDP Growth: 2.0X for 1989-200

tE----- Consumption from Public Utilitlee jAuto- Total Country(t otal - prod- Consumption

Residentlmi Como_neial Industrial Othe Annual ucere AnnualYear (GWh) X (OWh) X (GWh) X (GUb) S (CUb) Growth (GDh) (Cwh) Grow"h(I)

1970 4995 96.2X 1632 18.8X 4988 85.7M 20a9 14.SX 18796 4U81 164801976 6621 82.4x 2282 10.91 6885 48.5S 260a 18.1X 29416 s.21 4546 24w66 6.2X1980 686l M0. 811 0 19.7X 13865 47.0X a857 12.2X 29451 7.61 8664 8a886 6.051061 6899 30.6s 8242 11.1X 18276 45.6X 8639 12.51 29116 -1.1X 8479 82566 -2.211982 8649 29.2x 8122 19.6S 14084 47.41 3776 12.8X 20960 1.01 85u9 aJJss 1.5S1968 9084 28.7X 8826 10.6X 16227 48.8x s398 12.1X 81629 6.6X 9801 16461 7.2X1984 9577 29.0x 8559 10.7X 15964 46.1X 4049 12.2X 33900 4.91 4190 87109 4.6X1965 9746 29.7x 8653 11.SX 15465 47.1X 4076 12.41 82624 -o.61 8579 8648 -2.1Xi16 19456 29.4x1 8778 1.61 16698 47.6X 4876 12.1 855656 6.2 8s4, 89846 6.1X1907 11825 29.61 4184 10.9X 17911 47.21 4814 12.11 37084 7.6 3xss 41877 6.411968 11744 89.8X 4162 10.sx 17971 46.41 483 12.5S 88769 2.091 892 42062 1.911969 12817 39.06 4376 10.7X 19247 46.9X 5126 12.51 41068 6.65 8971 41689 5.6x199 12911 29.9X 4594 19.61 20321 47.6X 54U8 12.51 48229 6.81 4a19 47246 4.S019 18447 29.41 4685 19.61 21771 47.6X 6694 12.4X 45747 6.sx 4961 49826 5.511992 18669 28.91 5991 16.6 28694 46.06 6692 12.61 47966 4.01 4198 S29 4.CX1993 14821 2s.5x 8378 10.7X 24248 48." 6329 12.1 56268 4.8X 4119 64862 4.411994 147865 28.2x 6671 19.81 25862 4S.8X 6667 12.7X 52465 4.41 4127 66s12 *.1X1"S 15208 2.1 6997 11.95 28639 48.41 7028 12.8X 54847 4.5X 4181 56976 4.2X1996 15829 27.61 6342 ll.6X 27845 48.6x 7406 12.91 67415 4.7X 4139 01645 4.411967 16874 27.2x 6767 11X 29385 48.7x 7698 13.65 69224 4.9X 4129 64852 4.611996 16948 26.SX 7094 11.3 86788 46.sx 8229 p3.1X 68049 4.7X 4119 67169 4.411999 17589 20.6X 7652 11.41 82818 46.9x 8674 18.lX 624 4.7X 493 70062 4.81290 18183 26.2X 7986 11.61 88963 49.1X 9141 18.2X 69ITi 4.sx 49"0 7216 4.5

NOTESPoriod 1970-1997: actual dataYear 1998: estimatedPeriod 1968-2009: projections

HGG-11/15/89

- 111 -

ANNEX 0.4

Page I of 1

(Ff le:ttEn)

ARGENTINA - ENERGY SECTOR STUDY - PC128 SECTaR

ENERGY DEMND P8OJECTIONS - 1UHE SCENARIOS

i--- - Total Country Consumption ]Consumption Difference(1) Annual (2) Annual (8) Annual High Minus L, Scenario

Year (0h) Growth(M) (GWh) Growth(M) (0th) GrowUh(S) (0th) ()

1976 18486 1e486 184197S 24966 0.23 24966 6.23 24966 0.2X1900 esess *.es aaaas s.ux aaaas o.ax1981 32596 -2.2X 32595 -2.2X 82s5n -2.23ia easo. 1.SX eamse 1.6X 3ass. 1.6X1988 86481 7.23 36461 7.23 85481 7.2X1964 87186 4.3 37158 4.93 83710 4.831985 86403 -2.13 6468 -2.1X 30408 -2.1X196 89846 8.1X 39345 8.U3 89345 8.151987 41877 6.4X 418" 0.4X 41877 0.4X1989 42652 1.93 42662 1.95 4262 1.931989 48889 2.98 45639 6.60 456089 5.6X -12 -2.711990 47710 8.98 47248 4.93 47248 4.9X 476 1.OX1991 61328 ?.OX 49828 5.5C 49828 6.65 156 2.9X1992 54726 6.6X 52669 4.56 62669 4.53 2669 4.9X1998 gemVI 6.53 54882 4.43 64802 4.4X 8900 6.71994 6165s 6.83 66612 4.1X 66012 4.13 6608 8.2X199C 65278 5.98 69372 4.9X 59878 4.2X 62" 9.631996 69209 6.6X 62892 5.1X 01545 4.4X 7604 11.1X1997 78648 0.83 66199 6.1 04862 4.03 9191 12.531998 78042 0.13 76156 6. 67169 4.43 15888 1l.9X199 82868 6.2X 74466 6.13 76062 4.3X 12661 16.4X2060 8852 6.3B 76978 6.1X 78218 4.53 14084 10.9X

_***ce*" c ****_ * e"O ee(1) SE$o Energy Plan; Hlgh Deand Scenario(2) Mewt-Likely Deand Scenario(8) Low Demand ScenarioPeriod 1970-198?; actual dateYear 198s etimatedPeriod 19f8-2w projected

- Hi -

A0.4A - Dwom ScR sna - P o Anneo

Netlasal Ifh.rOA44.ee1 Sp%d ls - .t.tvust i. JOuwrt.2a S.d Tr2eussloelo WosIsaIssv..tmet Ilee "mate .md. two Dusesid soearl (1)(in s$ "I I Illss3 Price LevelsI Oear.,p 19o"

199 199w 191 191 i 199w 1994 1995 1996 Total

A.- Hi$% Oeaaad 6c#serbcToW Bwl. 195.7 5M5.0 879.1 4O6.6 4t4.2 U.o M1.$ 42.0 572.6C.4-rear 801.9 428.6 2t.O 147.2 115.1 1W.6 7S.9 2.5 1916.2SEA 186.5 16.? 204.5 200.0 1M.5 176.2 176.0 11.1 1W87.Total 6815.1 1021. 947.0 606.4 747.06597.7 1186.5 1001.7 718.6

S.- Net-Llk*lp Deomd scenarioAgse y b ie 195.7 3 .0 805.1 818.6 161.9 280.7 8.0 170.6 2100.l4drno 801.9 428.6 1M6. 147.2 96.6 85.0 W6.6 28.0 186.6

SENA N13 220.7 2 U4.5 2e0.6 2S 17.12 176.6 18i.1 1497.6Total 685.1 979.8 641.0 684.6 8.2. M71. 495.1 4=1.9 808.2.

C.- Ciffer..A 0.0 4 7.0 100.0 141.6 224.5 428.9 M.2 579.9 214.4

(1) I- ..lstea oe1 AgE. NN8.S and sA ass sip.

List of Projects

AAs

Sca ario AOngoing Week 171.2 15.0 54.1 45.8 46.7 45.7 4i.7 4S.7 1n.6

Pass? Pl ant

lWdro 5.0 78.0 141.8 2085.1 818.1 428.7 466.8 1684.8Thof=I 12.8 7.5 0.0 0.0 19.6

Tranonileeloes Work. 11.5 69.7 196.6 2118.8 187.4 106.1 218.4 107.0 1265.9Othes.. 13.0 13.0 18.0 18.0 18.0 18.0 18.0 18.0 106.0

Owiesels Wwee 171.2 255.0 64.1 45.5 46.7 43.7 46.7 45.7 710.6Pmer. Plants

*dro 0.0 0.0 0.0 0.0 81.5 67.1 Uo.2 st2.7

Th.ral 12.6 7.5 19.8Trane.1.tlo. Work, 11.5 6o.7 196.6 216.5 111.1 172.8 1o 5.0 O5.9 1139.7Others 13.0 18.0 18.0 1O.0 1t.0 O8.0 1O.0 1O.0 104.0

5~ss"rbo AOeing Worss 2e7.7 381.1 17s.0 56.s 19.6 16.9 18.8 18.3 971.6

ltIdrsplest.Piclsl-Picw,-Lewfu 15.1 39.6 94.8 6s.0 8.9 14.8 28.8 9.6 819.6

Cel lo Cur. 10.4 29.6 82.6 76.2 165.6ichihrsao 9.0 66.1 121.1 196.1

Trana_t_.lon System 7.6 18.7 17.6 10.2 7.1 67.6 12I. 266.3

scenrio 6onsgoing we"k 167.7 86.1 178.0 15.6 29.6 16.9 18.8 138. 971.6ltIdeopnt.

Pioe i-Plo,n.Leu 18.1 59.6 94.6 6O.0 e8.9 14.6 2S.8 9.6 819.8

Cal los CGar 0.0

Nicb;hlso 0.0Trawnms_lss Sy.te 7.6 18.7 17.5 10.2 1.4 62.5

Scenario AOesnein Works 100.9 21.5 1.2 124.6

Tlns_l Oeeroatloe 81.9 146.7 181.5 6.1 16.6$ 18.0 12.4 12.4 390.2Trom_elosi 1.5 22.4 45.8 U.8 85.7 29.0 80.4 11.6 242.6ODltribatlus 21.2 63.0 80.7 94.0 1to.6 112.6 114.9 92.7 682.9

Other. 6.0 S.6 19.1 a.9 28.4 19.2 10.1 17.4

055901no Works 10.0. 22.8 1.1 11.6.Th ml Ceeratio 81.9 106.7 101.5 21.1 16.8 18.0 12.4 12.4 800.1

Truesmalenlo 1.5 22.4 45.8 61.8 so.7 28.0 80.4 128 . 12.6

Distribatlie 11.3 sa.0 60.7 94.0 108.6 1. 114.e9 92.7 16.9

StAres 6.0 26.6 19.1 28.9 16.4 19.1 10.1 1*7.4

- 113 -

Annex 3.6

Page 1 of 1

(FILE:tVORO)ARNTINA - ENEMY SECTOR Sr.9Y - POWER SECTOR

ESTIMATED GENRATION COST OF HYDROPROJECTS SELECTED FOR THE EXPANSION PLAN

Averago Averase Generation Cot

Instelled Energy ease At Diecount RateCapactty Productlon Co"t as 1S

Name (MW) (Wh) (U38 H) ( Illa/M)_ __ __ _ ____ _____ ____ -

Corpus 4109 20100 2644 17.6 25.0

Coarenleutu 240 IlNe 16n 10.0 26.6

Cordon del Plate 1 849 2272 400 21.8 80.2

ColIon Cur 376 1492 261.6 21.6 JP.7

Los Slncos I 100 aso 64.1 22.1 81.4

Michihuso 617 2928 5689. 23.0 83.6

arabi goo 3126 626.4 24.0 $4.1Picht Picun Leufu 251 1020 222.6 25.5 86.2

Los Blancos 324 802 184.8 29.4 41.7

El Chihuide II 26W 1060 290.6 80.9 48.7_ _ _ _ _ _ _ ___ton- Ene-r

SourCe: Nbttonal Energy Plan, SE

- 114 -

Annex S.7

Page 1 of 1

(FILE:CAPS9)ARGETINA - ENERGY SECTOR STUDY - POWER SU-SECTOR

INSTALLED CAPACITY BY COMPANY BY END 197 (I)

Type St.a. Diosel Gas Turb. Hydro Nuclear Total S

AyEE 148.0 182.0 900.6 1727.0 4867.6 86.23SEGOA 2209.0 2.0 262.0 2478.0 17.83DEBA 856.0 64.0 207.0 627.6 4.43EPEC 249.6 24.0 844.6 178.0 795.0 5.6.HIDRON3R 2776.9 2776.0 19.4XCTMSG (1) 1418.0 1419.0 0.9XCNEA 16180. 1618.0 7.1XProvincial 45.6 86S.0 164.0 99.6 668. 4.63Others 156.0 85.0 1.0 192.0 1.83

Total 4407.0 788.0 1912.6 6198.0 1016.0 14268.0 180.63x 86.9X 5.1X 18.43 48.43 7.1X 16.6x

(1) Assigned to Argentinx In accordance with the International Tret

ENERDY GENERATED BY COMPANY IN 1987 (GWh)

Type Stem Diesl Gas Turb. Hydro Nuclear Total X

AyME 6264.2 101.0 18065.0 6712.4 12872.6 26.8XSEGBA 6166.8 889.0 6445.8 17.60DEBA 1875.7 26.7 824.1 1728.5 8.6XEPEC 992.0 7.0 616.2 486.1 2095.8 4.4XHIORONOR 7486.9 7480.9 15.63CTSG (1) 7657.8 7657.8 15.9XCHEA 6464.8 6464.8 13.53Provincial 81.6 426.7 214.8 478.4 1198.5 2.53Othrc 67.6 608.8 0.6 121.7 o.83

Total 15810.3 628.0 886M.4 21610.9 6464.8 48665.4 16.63X 82.93 1.83 7.63 45.4X 18.65 100.63

(1) DolIvered to Argentina

- 115 -Andox 0.8

Pag 1 of 1

(tile:. 9 .)ARGENTINA - ENERGY SECTOR S1IDY - POWER SUB-SECTOR

AOE OF MAJOR THERMAL PLANTSAggregate Iutstalled Capacity (VW)

Ag. (Yeare) )25 )15 (15 Unknown Total(26

SEOSA-Costanera 6of see al3 1280-P. Nuevo 339 260 689-Nuevo Puerto 369 8tO

Total 099 960 310 0 2209x 43X 43X 14X eX 1JOX

AyE-Lujan de Cuyo 120 209 829-San Nicolel 820 8so 070-Sorrento 0 10 226-3u_mas 120 120

Tote I800 120 719 120 13451 29X Os 53X 9X 1091

NEBA-Necochee 140 2004. Bianca 890 0 140Total 146 2W O 9 u4s

X 42X sex eX Os 100X

EPEC 616 61S

TOTAL 1471 1280 1029 736 46101 38X 281 238 16x 1093

Source: SE

- 116 -

Ann x S.9

Paso 1 of 1

ARGENTIN - ENERCY SECTOR SJTUDY - POWER SUB-SECTOR

SCHEDULED RETIREMENT OF MAJOR THERMAL PLANTSNot Capacity to be Retirod (MW)

Plant/Unit 198 1994 1995 1990 1997 1999 1999 2000 Totel

Costanera. 1 II 118Co.tanorn 2 its 118Coetanrna 8 118 118Coastnee 4 1us 118Costanera 6 us 11sP. Nuevo 7 185 1i5P. Nuevo 8 182 182S. Nlcolas 1 70 70S. Nicolas 2 70 76S. Nlcolas 8 To 76S. Nicolas 4 76 TOSovernto 1 81 SISorrento 2 81 81D. Fun. 81 19 Ju1to 4 28 29N<coch.a 1 81 81Necochoe 2 81 81

Total 62 0 289 0 185 6 O84 284 1845

Source: SE

- 117 -

Anex 6.9

Pae. 1 of 1

(fIle:UNAVAIL)

ARGENTINA - ENERGY SECTOR STUDY - POuR SECTOR

EVOLUTION OF UNAVALABIUTY OF THERMAL PLANTS (HIS) IJ (X)

AyE DEOA EPEC 3ECBA TOTAL

1976 80.6 89.1 89-5 89.51979 86.1 41.9 81.7 51.51980 27.4 88.0 ao.5 89.01981 23.6 88.6 11.6 19.8 82.01962 20.0 29.1 4.6 17.0 16.91988 81.9 88.1 8.9 14.5 17.81984 44.8 29.9 4.4 11.4 16.71986 48.1 82.6 18.8 8.2 26.4196 49.7 48.2 16.2 28.2 88.81967 4.6 46.8 22.7 26.0 87.61988 37.1 84.2 21.1 89.9 86.01969 84.6 80.6 28.1 46.0 88.2

1J NIS: National Int.rconn.et.d SystemFor AyE Unavaillability of Hydroplants are IncludedFor 1989 data through February

- 118 -

( t l:s.gb)Amnx 6.11

ARGENIN - ENER SECTOR STUY - POW SECTOr

SEOSA - ESTIMTE OF THE AVERAGE RATE BY OCTBER t109RESIDOIAL RATES

Consumption Co.wauptlen Average SalesRange (1) Rate Revenus

QCWh/bltnthly) (Ub/yer) O) OmSm 1I too)

6-16 236 6.618 J.6"162-1 1416 6.013 18.4842-M 1891 e.O 89.71189-466 164 6.6$ 17.6244006-U 632 e.o28 14.8905600- 2a6 6.681 7.810SWIM 272 6.66? 18.224M1M0 269 0.962 21.82

5969 189.983Average rats 0S.24

(1) Estimated

- 119 -

(ttl l.:ndus bisl)Anosn 6.12

ARGENTINA - ENDOW SECTOR SIWY - PC= SECTOR

INDISTRAUL RATES AS PREVAILING BY OCTOSER t 19 FOR SELECTED UTILTIES

Consumption Estimated Avr a9 Rate RatioRon" Cost Price/Cost

(Iou4so.mnth) (U8/KWb) (USI/ICU)

Company SEBA EPEC SEWCA EPEC

-Low Tension2J 9.148 0.114 0.209 77 141S6 01.0987 6.84 0.16S 973 i763

-edium Tension0.159 O.6W'6 6.166 49S 104X

6J 4.00 m *.. .119 66 17i3-419b Tension

158 6.112 0.688 9.146 6Sx 1s8636601 6.666 6.666 6411 61s 1too

-120 - ex 9.1

1.

-W Om IC=n 4v mi swi cm no mm NW RmMLiM min r.uF.*tm_t *f 1* Fauz f~~~~w :OS p

EmQ-Allm-AID-UM-M CRK OL m .xML mm Im ML

2PXI t1612 246? Im " 242 2U0 4556 10t.0CWAMi

T 1196 ' 227 5.2rI-ru r -3199 1 5 -m -566 -9211 -91 -4731 10.4

Cui + -16 -1157 -14 3.7NE tO TUFUS S 14914 23961 1422 39 162 M 41604 91.1

1nUIFUS VA WI L DQD RUL OL 1 R WWt Z . MAL*~~*S*W W,,au, ~~aaauuuua "auesagese sagasoueuuua~aaaaaaam s uasauaau

RIL FOR 101 FOR -3167 -657 -1671 -220 @v 56 *3n 6 0.0UB/LOS 1UPUTIO -23 -264 -16 -159 kWt -N - -35U1 12?.Ems #1:1 -33W 7393 9016 63M 274 -2M1 0 2 -11 3.

.5 * o St 5* 5 * 4 -74 -7m -12 3.3m. am -646 7316 8075 3378 16769 -2M16 t11 I1 -641 19.4

: ---------------- M M 0.0lET FM96 TNi W A 0449 7316 6675 3376 MO9 3*021 20 36 7.s

i /Ij67f"A NJ -7 -215 -474 . -6 -7 6 -16 4.0I OWtATII -74 -345 -115 -1974 -267 -2241 4.9

W tTATI 109 10 w 479 1.0R Be

. XQO~~~~~~~~~~~~8S8

. 7 776 7077 7063 1676 162 3142 165 29M3 63.6 100.0PCThOOENICIJOJIO -173 -925 -925 -1 -2180 4.8 7.5I E8IOfNSCl !.L -3995 -1037 -979 -97 -2113 -1426 - -73 16.6 6.1ThE4 IPUThTIS 0 -S50 -4705 -151 -9911 -24 0 -935 21.8 34.2AICIEM 0 0 -520 -1520 -31 0 -1551 3.4 5.3Z1NDUS1R!A. -3S06 -10 -'61 -162 -1799 -1659 -726 -7690 16.9 26.5NISC8JJIOUS -104 Q 0 -2 -106 0.2 0.4

TOTAL DOOSIC .0 USE 7778 7027 ':65 1676 16266 3142 166 29

Z OFEN TOTi. 26.6 24.2 1.4 6.1 56.0 10.6 6.4 100.0

IU* ICLMN hNOROL C OPS IER TrAM 9Y BY TV v UM 1MMi "6 TE PJLO 30 TO RIM E TRICYT L .:° ; . ' tt UMCE 1734 TP NU LECTCL POW I 3 FCWICf & 724 TV WCLAM* 43J1JT1T OK IN NOSS MOAKE ONa IN4 ?f::'4L -.M4 :AIaOC it f,P.AM AT TMI TMIE+* cci or IS A NIME W WORW TIN MWEN.:FIL AR 6 LOUD

Annex 9.2

121 -

1540

mu uiinF E_r sno us RW U . 0_ R

AL. MMl- g T.U.410

cueww x 9mw sra_n m on - m m G NS KELM U& Wl TM

FRUC= 15 220 1967 17 344 2564 446V 100.0

I TOI 199 6 2344 6.4-- am rfi = - 3 24 -209 -373 -95 -IM t -53 -5105 -11.4

MOM -1ItS 1t54 -2.6!V TO IWAUtIUt 150 21t6 1494 2 2140 4122 924

NErl--- .PETRI.!--- cmwu 0..IIFST?O toWS LMB DM FUEL OIL SA TOTILS ZIRcfa. OME TOAL. 0.0

MMM -,Lm9 aSa,20,s2a asa uinaa h 0.0

RQL Pt n . FM1 -3627 -597 -1303 -1900 crud1 6412 -8 0U#ASSLOT IInIian -395 0 br,A -346 -1034 -491 -11.0am am1 -12 671 893 4999 2Q69 -21866 340 950 L1I6ftW 0 CU -92 t0t -1 OO * -92 -107 -zm -6.1

On UTS. -53 012 385 36% 189 -21866 171 -31 - -15.0

lE FRM 1 1 _ 90 612 a38 3696 1BM 63* 2171 34536 77.40 t

SEIXlli USE LUSIESA DI/ -n169 -.1 -591 -1368 -204 -04 -35 -4765 -10.7QWATZO -55 -133 -813 -1498 -52 -1590 -3.5JFORtAtlOIC 0 146 146 0.3

M9 UU 7917 6125 7661 1S5S li01 3405 1744 28367 63.6 109.0WRODICM./ -145 -820 -820 -1542 -2507 -5.6 -8.8RESEN ICOMIL -4024 -1006 -*1 -79 -I993 -1506 -84 -7607 -17.0 -26. 8ZMAWMORtATI -37 4299 -4?14 -327 -9.40 -28 -9605 -21.5 -33.9mWLIIN 0 -17a8 -1708 -38 -1'46 -3.9 -6.2INDUSThIA. -3711 -131 -1109 -1240 -1833 -118 -6902 -15.5 -24.3NiKs.iUt 0 0 0.0

TOtAL OEMC Be UK 7917 6125 .- 1515 15301 340 1744 28367

CFS f IUm TOTAL 27.9 21.11 -, 5.2 53.9 12.0 6.1 190.0

Kam Al Hv°SIUCRC Pow 1TCAL.r ^.Y Z-.P BY P wICN uat8p 612! TW fUS Fo A TO PMi0 aETRICAL 2146 .' 'cE l177 T NEt MECTACL P!M4 33X tCII CtTH 93 '9 3 .tEPL.AME* ADJuIsTVET MN IN SW S Di SOEC SW: IN . :;& i !E i $:5:£ AT THIS TtE.* cNaITS IS A NDWU S TCAFMF TIN CEL.-:;

L MMSUI LOII

Annex 9.3-122-

-Inim aM O Os, "mIn am uw.m FM GM MN

IA. tLT IN T.LP.060

PUDUCTI 35176 =276 175 161 3366 32 5394 106.0

DORTATN 1999 on 28 5.3LOSSEL SIIIW ? . -312 -190 -350 -946 -12= I -111 -4720 8.8c lo t 1260 -180 -23NET TO IUOITION 24054 2986 1403 667 2070 23 5040 94.2

NT - - ---------- PTOE-- COUIR

Tww1T=1 US tEW L INMM E. OIL S1B TOTI" GEInu= OIrm MTAL:*flxez:1sps:fl1Az Sa "~u UaSUSuU,ua 8a23:als:3s 38813S2* 2U232U8328 3UU2 svUssxUUUU28U

R QRLI Ft I. P_ -61t23 -462 -1187 -1649 crdu 8GM5 -1t23 0UJA1ILOST TIWETMN -1241 0 irut -5 -139 -8008 15.0Bow amU -1709 7569 10198 3601 21368 -2196 410 1782 3.3N_lAD 0Mt 18 0 0o -749 -218 -94 1.8

TOTAL SEIT0 -9055 7569 9736 2414 19719 -21996 2188 t379 -72 13.4

MET FRON IU_FOR 1TIO 14999 7569 976 2414 19719 475 t 4109 4355 80.80

soaw 0SE.LSOMA 8IW -2722 -142 -599 - -1632 -66 -2687 -7117 13.2

AMTI-N 27 -1213 -377 -280 -1870 -55 -2152 4.0WORTATlIN 0 97 97 0.2

X ENDUSER

FO lSERS 12050 6214 s760 1243 16217 4m19 1967 34413 63.8 100.0PERO WICIAOTIM -4840 -1080 -10 -172 -4702 8.7 16.2FIESID0ICO1MCIAL -5291 -9g8 -911 -60 -IF.9 -1791 -77 -9118 16.9 31.4TRfSPOVATIN -279 -4146 -!481 -428 -1005 -3 -139 19.2 35.7A68ICILInl 0 -2212 -2212 -46 -22!58 4.2 7.8INW9TRbISL -640 -1.56 -755 -911 -2307 -108 -766 14.3 27.4IIISCB.AEL 0 0 0.0

TOTAL DOISC E USE 12050 6214 'iO 1243 16217 4179 1967 34413

Z OF 0 U TOM 3X.0 18.! _..5 3.6 47.1 12.1 5.7 100.0

t 1XLEA ND HRC9TRIC POIIER MEDMTICAY I S; ATSE!D B OYMSnU L LTt 9776 IV fU3U AM T PRUR EECTRICAL 2A0"' 'T PROD'XE 269 V8 NET 9 EEC1TIAL PFOB #33 UFF.;W WMH 749 Te IWPLADED* AISTENTS SM IN 989 BAACES 96M L4 4AT::Nk PLNI A10T oi SMADO AT THIS TiL.* CN9SJMN 1i A NDME OF iSVTNZN L'i4'.Fab 88589I Loum

- 123 - Annex 9.4

ZL am 23 T.LP.*US

- sr$ l UK m m aR ou. O L H EA TM O TOTAL TIIMmsv. e 2226" MSS* am"2221 9ms# " so agss s $a"sasgx

IR.gOr 31769 2315 3137 2781 5918 3no 649 lGO.O

RTI 0 879 879 1.4nO9SESLIWSTNNIAT1 -391 223 -62? -1631 -2258 -107 -6279 -9.70 + -+ -im -1.9

XT To TRIWIT1I 28073 23292 2510 110 3660 2767 577 89.7

5t --Er----PRMLSSt ---- --- CUIIRYXwug lIM KW LSS WNoElo PJ11 OIL "TOT" f RI OTIm IOTA.

UUUaxasussm XXSG*vSSSX :3agz8saas sa:uhza **semUh*" 3888a8Ualm

PUEL F8 T11ElL FMl -6135 0 -405 -1119 -1524 cue 8g -10 0USEL / 1RNO TlN -1356 0 irout -55 -1389 -97 -12.5Oear IECTOR -2265 862 10933 3462 23017 -23292 432 1788 2.8.iELAO C0W6 1 1 '00 199a -809 -191o -2519 -3.9

S13 TOTAL MmR -9755 8621 10728 2343 21692 -23292 20 -69 -801 -13.7

-Et FRN TRlN TIN 18323 8621 .-I8 2343 21692 6283 * 2698 48996 76.00

SEC U#SELSSES1E/ADI -3109 -15 -838 -867 -1860 -969 -458 -63 -9.9OA ATl i -303 -2130 -6 -342 -24be -75 -2866 -4.4NRATN :26 186 305 491 0.8

NDl USERS 14911 6336 MM3 1134 7530 5619 216 40225 6.4 100. IMEROD ICAJOTI -1840 -108Q -1.080 -1996 -4916 -7.6 -£".'rSEIDIE! lCO . -65 -104t -940 -48 -28 -2273 -71 -10"89 -16.9 - I'.tTRNSPTATIN -581 -4216 -5669 -567 -11052 -45 -11673 -!S.1 -29.:0AiLmE -1 -2651 -60 -2711 -4.2 -6.7IW XTRIA -5967 -519 -719 -3241 -98 -0025 -15.6 -24.9ISUcLOS 0 0 0.0TOAL DOCTC 0 USE 14911 6 ! 1134 1730 '619 2165 40225

. OF END 'JSER TOTAL 37.1 15. S 8 43.6 14.3 3.4 100.0

NiOTES.S MMEA 4 HA RO5EL C PFM nE1ErTLL ,Y .c- !Y TeP -:ICN WIlTS

8757? W PQS ADDED TO FIIDY LECTRICAL 366' -O* .. Cz VtZ % SET EECTRICAL M. ER 33X EFFICNCY WITH 809 'ED ?.EA!tANE* ADXSJI NAK IN OM7Y BNAS SJ(N O LA I :::i ;NN:N." H ? D AT THIS T-l* CCNUTI4CN IS A TRN TICN :CUMTERILEt AR9SSI '. OTUS

Annex 9.5

- 124 -

311 0M#M a200 $N=20 RAO FMML NM Il '"

LL U01 Dl t.LP.188S

nm STAE S W ONE m 8IE D*. 0318= T IOT 030 =2TA. Tori#~~~~~~~~su,u uau_ua aaaau ingsu .lu_ia asagum .,um8

TU 362S 51 D2 3644 on1 335 7SM 100.0

879 8O9 1.2.099S E A/ I AMTIO -4335 -254 -104 -2137 -31021 -10 -787 -10.5a,w * -I= -tiM -1.7

'El' TO RAIJFIm 31136 26497 4183 1507 5689 2U3 67015 09.0

N-------E-M------ ---------- c8um

TRMI I is W US DlTmq FUL OIL g TOT"Ls ERIC a0m0 TOT...A*1 _""zams_ ................................ XSX.s XXXXS t"*".f t,.. ...................

-18.F T0f FOS. -6108 -3 -t169 -1602 aMads SIX -tt13 aJ#l/A lM I FOSTION -1353 0 twut -4 -13 -8056 -10.7eW? sECT0 -269 971 1262 42 26248 -269 46 1731 2.3JtELA CIWE -107 1 1 - -200 -3018 -4.0

U TOTA.L SET -10267 9781 11729 3137 24647 -26497 28 1s -93 -12.4

NET FROM lRIFSTIN 21669 9791 11.729 337 24647 837 t 09 57672 76.60

#E1 USESLDSES/IMIE J -3511 -177 -725 -938 -1040' -137 -458 -7187 -9.56O ATION -303 -2688 -18 -1147 -3953 -154 -4310 -5.7

ATIO 793 799 79 1502 2.0' Y~~~~~~~~~~~ END

ENDUSS 1755 6916 11779 1052 19747 7630 2437 47677 63.4 120.0PETRODOIC/OTE -1840 -I090 -1080 -2277 -5197 -6.9 -10.9RESIQCTIALJcECIAL -7813 -1094 -9.'6 -40 -2110 -2904 -71 -1289 -17.1 -'7.1RANIOATION -770 -4742 -7388 -621 -12751 -59 -1350 -18.0 -29.5

AICULTME -315 -3155 -78 -32 -4.3 -6. 3INDUSTRIAL -1432 -:60 -391 -1 -4597 -89 -12769 -17.0 -'6.3

14ISCSIAOM a~~ ~ ~~~~~~~ o 0.0TOTAL DONEIC EN USE 17M 6916 ::9 1052 19747 763 2437 47677

I OF EBD USER TOTI. 37.4 14.5 ;4.? ^.2 41.4 :6.0 5.1 100.0

I MJCLER IW HYDROELECTRIC PlME TIEORITCPLLY tBY^ E 5 y TEP C'NERSININ LITSP 2035 TEIP fUL8 ADED TO PRDIAY LCTRICAL 5669 tE 90D'JE 26-9 -P CF ?(T EUECTRICAL POE 0 E CIMEY WITH 90" TEP L?b EP.A* AIJTIS i A EI IN IRBY NUS SW iN N'!:W N O PS ' LRA AT THIS TIlE.*+ CGA FTION IS A KIDJEE OF TRINMA TION CT :: M -FILE AEss LOu

- 125 -

Cross-section ftforatios as Housold : udte Ptrolm Products and 3lectrie.t

Ie ustituto PeimI de Ustadisticas 7y Cano0 (UUC) codueted 'a loushold .t*r 7u (huesta de asto de Hoga:e.) during theperto 196511966 of Iouseold n the aro of the ederal Capital Districtsd Grater Dues. Aires* Total expeoditres include the purcbase ofdurable. other tha hons, and Incll includI S wages snd salaries,dividends, rest. d isnterest as well as transfers.

Table shows the saomt spet msithly is Apil.Juoe 1966 on eachfuel as a percentage of inam tog each quistilef Imac distzgribution aswoll as income leel. $Sm inteesting patters. of expeaditure areevident. rust, the largest expenditure lt_ is gsolie, hLch wms in therane of 4.1 to 4.3: of Income for *all huseholds reportng expentures lathe surys. Electricity iL In the rage of 143 to 1.6: beroes.e, 0.9 to2.16: and LPG, 1.2 to 1.9H. Second, expeditures on electricity, naturalgs , *ad LPG as a percentage of Incam fall a.s Incoe Increase$. Thispatter. is consistent with an incame elastiaity of less than 0. Tis doesnot man that the asmut spent falls: as*. sDho the mount opmet rises asincome increases. Thir4, the nauber of households rporting expendituresas atunral gps ad gasoline icreases as Incmao increase, whle the numberof users of LPG and kerosene falls. The ltter is to be ezpected as incioegrows, sd th availability of nAtural ps increases which. la addition,has been a mah cheaper enrgy source.

Table I

Eum_ldtaFe an a, a meoatOe oW _aof lodituo Wei a d os a oele o m * a

ot the tftal numb. of unite In so" uietil, (1n b

S-ov A.'l - JUn _

(21)Aveog Incom per cas;t.

la amsteal of 1m-KU1

Aet I - June* tll_ 11141roty Not. 4. K0QM9 LG 40110 i

tab qulatiW 3. (.0) 1.4 (33.6) 1.0 (18.1) 2.1 (68.1) 7.1 (11.5) 34.7

In qualtl.* 2.1 (54.1) 1.0 (64.6) 2.4 ( 4.1) 1.7 (30.3) 0.4 (15.5) 62.1led quinti 1.7 (08.4) 0.? (70.5) 0.7 t 0.0) 1.4 (29.5) 6.1 (35.9) n9.54th quintil. 1.4 (97.1) 0.0 (M.1) 0.0 ( 4.1) 1.2 (12.3) 6.5 (54.) 131.05th qainwz II 0.8 (03.4) . 97.4) 1.3 ( 3.) ... (12.1) 5.1 (604.-) M.

Avon" 1.4 (51.2) 0.0 (66.g) 1.1 6.5) 1. (20.4) 5.5 (M.1) .3

so.,.. C. Givorl, siculatiosMemoo on preliminary Infwontloe peeided by DOIC.

- 126 -

Annexes 10.1 - 10.7 onIntegrated Finances in the Energa Sector

Following are Annexes describing the financial projections for1989-1995 for YPF, GdE, state power companies, and EBY, which implies acontinuation of pricing, tax and investments policies, and plans as offirst quarter 1989. The projections do not reflect the World Bank'sviewpoint. They are based on data presented to IBRD by YPF, GdE, and thestate power companies during the preparation of this report (details aregiven in Annex 10.1 - 10.7). Neither do the projections reflect urgentlyneeded reform in the structure and cross-subsidization of the sector.Events subsequent to the March 1989 mission may have made some of the dataobsolete with revisions required, and references to 1989 data in the reportand in Annexes 10.1 - 10.7 are preliminary figures. New integratedprojections have not yet been obtained from the newly elected government.

- 127 -

DO NLLIOS OP, use6 MWUID4A Annex 10.1

MMUC sawSo"R Page 1 of 8PR TSe OP iNC AN E(PB. 1989-1995 CI I (DoDuAL COWANI8)

199 1990 1991 1992 1998 1994 18 TOTAL

yPP

Sales of Crud Otl 724 089 923 994 1071 118 1242 6946Soles of O*sll lkn. er l11O 1868 1495 18 175m 1694 2049 ln21Sale of Oaelin. Rel.r 622 738 781 827 on 926 "I 89t2Sales of Krarue,, 124 129 184 189 148 149 18 975Saoe, of 0l. Oil 2084 2422 2849 2802 2478 2879 2284 1o68Soles of Oteel 0IlI 0 0 0 0 0 0 0 0S I af Fuel O I sa8 18 211 206 26 268 261 1ati$.1.. of Other Pat. Prductc 68 6,47 679 7183 749 7ed 825 8015S ole of Natural a" 8S1 8au 874 12S7 1698 2262 8022 100l6Sale, of Eaopto 208 216 220 288 249 266 285 1666

o0SS DicUE YPF 8aw 7379 7672 8864 9240 10066 11124 60426

O de CSoles a" Domestic U.. 20 818 880 849 868 $811 407 2481Sal.& 0.. other 918 1080 1018 1t5 1t19 1210 1215 7748S.o I es 10o 11 la 16 20 25 29 128Sales Ethane 47 83 5 SS 88 S 58 868Sale. 014alIne 17 17 17 17 1i 1t 20 124Sale s3tan. PrApWm 142 146 170 175 179 182 Itt 1160Sol- aLPG Exort 0 0 0 0 0 4 7 11

TOTAL SAt 1427 1570 1.00 1769 1887 1660 1917 12000Other lneo 48 43 44 42 4 48 A8 S02

Fws INCUS a de a 1470 1618 I164 161l 181 1923 1960 12802

F d. Pewer Cos.So1le Elctricity 1785 1979 2212 2456 2672 2906 8119 17129Trun_uleccon Fe. 9 17 18 14 is 20 27 1tsOther Inca" 2S 28 24 24 25 25 29 178

Oroa. lec_e Federal Powor Cos. 1817 2019 2249 2494 2712 2951 8178 17417

YAC'VNEASales Electricity to 372 666 116S

Oroe. Income YACWETA 0 0 0 0 125 72 666 1163

Total (oesa Income Enarg Sector 9804 11011 11505 12889 18956 15314 16928 91506

kimn A. Stoddartdoc8/,2/89

- 128 -

IN MILLIOS US1 ANNE 10.1

Page 2 of 3

ypp 1989 i990 1991 1992 193 1994 1953 TOTAL

Crude of Oil Purcha"a 784 878 659 793 700 637 S73 S202Production Eexsns@ 331 353 370 381 393 408 417 2880Rofineay E ponos 204 210 225 235 243 250 25e 1636Transport - Part Esoense 70 75 76 so 83 so a9 se5P;p-lino Exqen* 65 91 95 e8 101 104 107 601

Neint A Repair Production 217 231 242 249 256 267 27 1741mpint. R.ps:r Refining 49 52 S5 so S8 60 62 3e2laint. A Repair Transportation SS 58 61 e3 6s 67 6o 438Min6t. A Repair Pioplines 12 13 14 14 15 1s 16 99Fuel Power 28 27 20 29 30 31 32 202Canrsl A Admin. E-P*ene 227 242 254 261 20 279 259 162Commercialization GePense 15t 161 t69 174 17 164 140 1200Exotorotion/Rezeerch Costa 72 90 103 107 110 113 11? 721Medical Costs 50 54 so 50 60 62 64 404Dry Hole Coste 138 148 1SS 159 164 169 174 1107S*-r;c Stn. Mark Up 254 20S 297 337 371 406 440 2401Product Purchases 309 330 345 355 367 370 309 2473

Total Oeraot;ig Esp. YPF 3003 3315 3409 3449 3r47 3515 3572 23730Operating Income YFF 385 4064 4263 8135 576 55s8 7552 AM60

a de EPurchases National Natural Ca- 452 SOO 515 614 6e3 670 660 4007Purchase Ioported Naturol Cs- 205 20S 205 67 0 0 0 662cost of LPO 2 53 so 58 e5 65 e6 419Vages A Solarieg 92 93 94 9O 96 97 96 66sOperating Cost. 212 224 241 283 261 276 207 1754

Totel Operating Sep. 0. de F. 1013 1075 1113 1067 1076 1100 1133 7607

Operating Income Q. de E. 47 53E S31 724 803 8t5 827 4695

FEDERAL PtVO COtPANIES a/

Labor 316 317 323 32S 322 322 322 2245Materials, Service* A Others 175 170 187 201 209 220 232 1402Fuyl 360 391 332 370 422 305 358 261Electricity Purchased 132 16o 163 143 22 273 405 1410Transissi.on Charges 3 3 3 3 3 3 4 22

TOTAL OPERAT EXPEE PED. POW COS. 08"a tos 1000 1040 1078 1201 1821 7703Operating Income Poser Companies 31 950 1241 1454 1634 1750 1654 9714

YACYRETA

Operation A Maintenanc 3 e t16 20General A Ada. Expense 2 7 13 22

rotal Goerating Expense 0 0 0 0 S t1 29 S0Opersting inco Yacyreta 120 35 037 1113

TOTAL WXP9ISE ENEY SECTOR 4As3 5120 51t6 5221 56 5462 J566 36625OPERATINC INCOME EO'V SECTOR 5153 5882 6300 7668 089 9852 11259 540S

a/ AYE NMRLIIO, SEMA1/24/90

- 129 -

ANNEX 10.1IN HILLIOS US$ .V. c .. p

199 19O IwI 19 92 1998 1994 1995 TOTALL85S

PFFROysitt;e 310 324 323 382 336 382 328 2285Fuel Tax 2132 2406 2482 2685 2764 28SS 2904 18216Pidro Developmnt Tax 162 18 215 238 258 278 296 1682Direct Tax 251 25e 260 266 298 807 Wt1 2007Inrtre.t Expense 684 812 23 29 e07 763 759 6SW7

Total Roayltiea - Taxes - Interert 3709 4005 4123 4377 4456 4580 4605 29807D vrec.ation S122 1104 1068 1080 " 963 931 7214Total Non-Operating Expense 4831 5109 5191 8407 5454 8401 8536 37021Net Inco. PF -278 -1045 -928 -272 811 1060 2016 -138

a do EInco_ Tom Province. 2e 23 29 32 83 34 85 216Incaee Tom FRderal 47 119 11e 119 408Capit;l Ta* 28 26 S3 41 SO 87 280Selec T. 1S t 7 a 7 6 6 J4Other Taxes 23 23 23 23 23 28 23 161Interest 153 143 186 129 121 S11 107 90

T otjl Taxes - Interest 218 225 22t 272 344 N42 847 1966Dvpraciation A Rerve for Slf In-. 263 280 292 301 811 324 Sal 2102

Total NMn-Operating Expense 478 OS S13 m5 6a5 666 67s 4066Not Incoe . d E. -21 33 18 151 14t 149 149 627

F30iAL POWR COIWAn .1Incoe_ Tam Provinces 104 112 122 184 144 154 161 931Income Tax Federal S9 76 a5 95 102 110 117 6S4Sale. Tax 232 258 267 322 351 364 416 0Electricity Fund 1in 171 190 2S1 22B 245 260 1461iayltiem 20 19 36 43 44 45 46 253Interest Expetwe 331 12 328 s82 810 285 192 2070

Total Roayltie- - Taxes - Interest 912 948 1046 187 1179 I203 1192 7619Oepreciation 277 292 304 328 335 348 352 2281-- _-_----------------------------------------------------------------------------------------------------------------------------

Total Non-Operating Expene 1169 1240 132 14e5 1514 546 18544 9850Not Incee Power Cmpanie -3 -290 -111 -11 120 204 81o -436--------------------------------------------------------------------- __------__------------------------------------------------

YACRETALoan Expense 759 68 So1 2174Coempneation Flooded Area. 7 21 40 6eCoapenstion for Energy Transfere 9 25 48 79

Subtotal 0 0 0 0 778 900 684 2321Depreciation 74 SO 158 377_________________________________________________________________________________________________________________..______--___

Total Non-Overating Empene 0 0 0 0 849 1030 799 2698Nt Income YACWA -72 -94 -162 -1565

Total Non-Onerating Expense 6607 7164 7401 7600 e89g 9133 6946 86lloEnergy Se;or

Nat Income Energy Sector -1684 -1302 -1021 -1t2 -i5o 719 2313 -1227

./ AyE. HN1OR ,SEW2/14/90

- 130 -

IN MILLIONS US2 ANNEX 10.2

ARGENTINAPUBLIC ENEROY SECTOR

PRO.GCTIONS OF CONSOLIDATED STATUENT OF INCOME A EXPENSE 1999-1I9MFEDERAL

INCOME YPF 0. de E. POWER COS.a/ EtY b/ TOTALSales of Crude Oil 6946 694Sals of Gasoline 17278 124 17897Sales of Gas Oll 16573 16576Sale of Fuel Oil 1386 1386Soles of Other Pot. Products 5no 403 6473Sales of Naturl a 108s loe 10197 20515Exports 166s 11 1i96Soles of Butane a Propane 1130 116tOther Incom 802 178 475Sales of Electricity 17129 1168 18292Tranemleglor ees lS l1

Gross Income 60626 12802 17417 1163 91503

EXPENSEProduct Purchases 2478 2478Crude Oil Purchases 5202 5202Production Expense 2060 2e50Operating Expense 3699 1754 26 6801Maintenance & Repair Expense 2670 2670General & Admin. Expense 2226 22 2243Co,asrcialization Expense a600 860Dry Hole Costa 1107 1107Fuel Cost 202 2616 2913Labor Costs 6s6 2246 2910Materials & Services 1402 1302Gas Purchases 4769 4769LPG Costs 419 419Electricity Purchses 1440 1440

TOTAL EXPENSES 23878 7607 7708 S0 8909OPERATING INCOME 6asso 4695 9714 111S 62410

LESS NON-OPERATING EXPENSESRosyltios 2265 268 2586Fuel Tax 10216 13216Hydro Development Tax 1632 1632Capital Tax 2007 280 2287Income Tax Provinceo 218 981 1149Incme Tex Federal 408 664 1067Sales Tax 64 2260 2804Other Tax-* A Expenses 161 147 o03Electricity Fund '461 1461

Subtotal 24140 1066 5549 147 80902Interest Expense se67 900 2070 2174 10311DeprecIation 7214 2102 2231 877 11924

----------------------------------------------------------------------------------------

Tote Non-Operating Expense 87021 4063 9650 206" 68687Net Incom -188 627 -186 -1538 -1227

*Includes Reserve *r Self Insurancea/ AyE, HIDQONOR, SEGOAb/ Entidad Naclonal Yacyreta

1/24/90

- 131 -

IN NILLICNB oP UN AR0S(N Amex 10.8

R.SIC eNv SMw0R Page IP"8JWIsFS aF IVIWAL BALANCE sES 1989-1996 (YCP wCU.6)

1989 1990 1991 1992 99 1994 195s

YPFASSETS

Cash & Dnks 168 I66 194 217 238 249 216Accounts Revlevble 1898 1s5 lo0 w623 193 2120 2290Inventory 448 477 408 481 478 475 472

Current Aeeta 2001 2231 2307 2521 2674 2e44 s82e-- - --- -- -- - --- -- -- - --- - --- -- -- -- -- -- -- -- -- -- -- -- -- - -- -- - - -_-- - - - -- -- -- -- -- -- -- -- --- -

Praoerty Plsnt & Sispment 92 8782 8418 86 7751 7441 714(Net of Am"tit tion)Work in Progren 484 477 501 S26 552 a60 609

Sybtotal 9479 9229 e919 6594 8803 6021 7752

Total Aeste YPF 114P0 11460 112 1i11S 109" low66 10760

LIAIL -rI

Accounts Payable 11462 1098 1076 1061 1048 10S0 1019Current Portion Loogteru Debt 726 s6o S1 561 8so 651 848Le Part Paid by GOA -481 -829 -311 -297 -301 -3l0 -301

Current Liobi IItlea 1427 1844 184S 1825 1607 1588 1861

Long Tein Debt 438 4038 3534 2997 2168 2098 2085Portion Auaed by 68A 180 459 770 1067 18 1026 770

Subtotal 4518 4497 4304 4084 8581 8124 2805- -- -- -- -- - -- --- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- - -- -- -- -- -- -- - -- - - -- -- - - -- -

Capital 5840 8619 S576 5726 s568 6186 6414

Total Li.b tItl ,s YP 114 60 11480 11226 11ls1 10977 loo6 10780

John A. Stoddortoehc7/28/69

- 132 -

IN HILLION OF uS. ARtTtNA Ann-* 10.3PUBLIC GUR0Y SETOR Pag 2

PROJECTIO4S Of I8IVWtUAL 8ALANCE SLrs t1969-19,9 (YCF EXCLJDED)

a de E 1969 1990 1991 1992 19s 1994 199SASSETS

Cash 20 20 20 20 20 20 20

Accounts RecoiewbI. 422 484 473 522 543 538 Su8In.entory 6 7 7 7 a 7 7

Other Current Aaate 163 163 161 160 16O 1S Ms

Current AO-ta 61 684 66l 709 729 740 747

Property Plant A Equipent (Net) 3502 8664 3674 3623 3561 3583 3431Work in Progr"e 336 215 200 228 242 148 146Othlr Fixed Aot 93 93 93 93 93 93-------------------------- _--_-----------------------------------------___---__----------_-----

Total Fi ned Aaato 3931 3972 3967 39"4 3896 38M 3870

Oth.- An.ote 196 197 194 195 192 193 189Chenges in Worki.v Capital -178 -192 -95 99 386 699 1092

Subtotal 23 5 99 294 570 892 1281

Tot I Asatt 0 de E 4365 4831 4727 4947 S203 5484 6698

LlSILTtESAccount. Payoble Supplier 220 284 233 254 262 285 253Accounts PaymbI Bvliisen Gas 100 34 34 - - - -

Accounts Pay*blo to ODA 379 386 389 391 391 392 394

Current Portion Lone-Tero Oebt 157 162 1*1 181 190 190 100---------------------------------------------------------------- _--_-__------__----------------

e.W9T LIA1IL2TIES 58s 836 837 826 843 647 74?

Long-Term Debt 1958 1842 1727 1609 1479 1846 1300

Reserves S3S 330 353 379 407 484 462

Subtotal 2260 2172 2080 1988 E868 1780 1762

EtIJrTYCapital 15S2 1575 1651 72? 1826 1940 2061

Rettined Earnings -7? 48 is° 406 648 E87 1120

Total Liabilitie 0 de E 4S8S 4781 472? 4947 203 5454 6698

John A. Staddartshc7/26/89

- 133 -

IN NILLIONS OF USI 4ROAINTtA Annew 10.3PUiLIC S5EV SBCTOR Pogo 3

PIRJCTIWtS OF D1V=tAAL BALANC S ES 1989-1195 (YCP EXCLW0W)

(Ac1) (^etu l)POWUR C0iNI 197 1966 1969 1990 1991 1912 1993 1Me4 1VV5489615Cash * Art. 20 24 24 23 25 27 29 32 33Ac:ount a Acoivei. NOO 368 823 339 356 392 423 461 493Itwentor.ce 22 20 21 22 20 i2 24 22 21iothr Curwent Laet. 157 66 59 Si 53 s6 so 6. 64

Current Asset. 699 476 427 435 463 497 836 576 613

Property Plant & Ewulent (Net) gm3 9367 e729 9166 10S05 11673 11638 1t534 11479Work in Progr'es n 632 1042 1340 1249 StO 638 1440 2202

Fixed A&"t 996 1019V 10771 11306 11754 12163 12476 12974 13661

tnn t_enta 96 t9 1CO 102 104 105 107 109 IIIOther As"t. 192 203 212 225 240 262 329 375 421_______ _____________-__ _______________________- __- __- __- ____- _-____-_-_ ______.-_________-._____ _____-.-________.______

Subtotal 268 302 312 32 352 36a 436 484 332

Total Att 10955 10979 111510 12068 12339 13047 13446 14034 14826

LIADILIT6S9AcCounte Petb lo 874 3a9 339 296 2S3 252 242 289 329Current Portion Long-Ters D bt 475 178 i36 166 234 275 335 366 349Other Short-Term Liabi ltic. 22S 204 220 231 232 232 229 233 230

Currmnt t Lisbitl_. 1272 721 697 697 719 759 60S a66 906

Long-Toro Debt 3718 3680 4032 4200 4233 4146 3966 372 3618

Other Lisbilitis, 460 570 461 372 300 241 220 203 to6_____________________________________________--__________________________________________________--_----________---

Subtotal 4193 4450 4493 4572 4533 4367 4108 39SS 3798

Cap tol 682 682T 7171 7749 6248 6700 9091 9591 1016Ase.,es 1i1 15t 151 18) 182 1t3 156 137 160

R.tsined SEminp -493 -870 -1002 -1101 -1092 -952 -790 -557 -236

Total Li eb;i I' tia Pper Sector 10958 10979 11610 12068 12559 13047 13448 14034 14826VACTWAU

Cash a 8 nke 27 20 IS 10 5 5 S s SAccounts Receiable 21 62 111Inns.to-e., 1 1 2

Current Ass" 27 20 15 10 5 5 27 68 118

Property Pln 8 Equi. (We) 7340 7365 7367Work in P'ogr..c 3066 3816 4712 5601 6438 7331 121 104 71

Pi wed Ast 6065 3815 4712 5601 6438 7331 7461 7469 748

Other Assts 2 1 1 1

'total ASsta 8112 3888 472V 5612 6443 7336 7489 7S3Me 756LIA8ILITIESAccounts Pvywble 74 78 87 71 43 29 30 27 22Current Portion Long-Tr, 0obt 72 t4 65 64 70 84 S51 198 209

Current Liabiliti;4 146 132 1S2 133 113 113 181 225 231

Long-Tere Debt 1134 1451 1763 1976 2119 2114 2045 1929 160.

Other L;bilit;is 1736 2156 2700 3377 4077 497S 658s 6673 6973

Cap;tal 94 94 114 124 134 134 134 134 134Retained Earnmns/(Loaexo) -729 -1423 -1884

Total Euity 94 94 114 124 134 134 -593 -1269 -1450Total Limblites, 3112 368 4729 5612 6443 7336 7489 7538 75S6

John A. Stoddart:N,c7/26/09

- 134 -

IN "ILUOSi OF USt AROBTN Amex 10.4PtLtC 46Y SCTOR

PROJg'zNS Of C60O0ATED IAUNCE SlS 1989-1985 (YCF EXCUW)

ASSErS 1969 1m 199 1m2 193 1994 199

Cash £ Sank. 224 289 244 269 28? J06 326

Accounts Re eivab l 2186 2871 2438 2787 2952 318 84s9

tn.*ntor1** 470 806 60 510 509 508 S02

Other Current Assets 222 214 214 216 218 219 219

Current Aget. 3054 8330 8426 3732 3966 4228 4506

Property Plant A Equiment (Not) 22256 223 22597 23304 30290 29923 29420

work in Proe. 6g44 7633 688 8595 1758 2270 3026

Other Fixed Asete 93 93 93 98 93 93 93

Fixed Aat 26698 30106 31076 32052 32138 32286 32541

Other Asst 337 358 451 661 1015 183? 1618

Total Aweete s2264 331 34955 38443 3711? 37691 38660-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- - - -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- - -- -- --

LIABILITIES

Accounts Payable 2807 2116 2028 1987 1973 2006 2017

Current Portion Long-Tern Debt 1066 4 1066 1101 1536 le60 1501

Lane Portion Aoauned by 0oa -401 -329 -311 -297 -301 -301 -661

Other Short-Tern LiebIIIt.ia 220 281 232 232 229 258 230

Current LU bilit) en 8312 5012 3015 3028 3437 3543 3447

OIhlr Liabilities 8161 3749 487 5218 6007 6s87 7188

Lona-Toro Debt 12138 120S6 11613 lose8 965 9125 675

Portion A"uned by 0a0 ui 459 770 1067 366i 1026 7O

12263 1018 123s6 LIs38 11021 10151 9528

iqumr

'eerven 486 481 so 532 S62 591 622

teteined Earning./Lo.ao -1079 -1053 -938 -s48 -671 -103 -492

a, tel 14351 )3067 1560 16287 16890 1725 1ss6s-- - -- - - - -- I - -- - -- -- --- - - - - - - -- -- -- - -- - -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- - -- -- -- -- -- -

Subtotal fEuity 13826 14498 18180 16273 16561 17321 16738

Utt b;Llties 32264 38771 349SS 364, 8717 8te7691 38860.- -- -- -- -- -- -- -- -- -- - -- - - - -- -- -- -- -- -- -- -- -- -- ----- - -- -- -- -- -- -- -- -- - -- - -- -- -- -- -- -- -- -- - - -

*n A. Stoddert:ahc

7/28/e9

- 135 -

IN ML.L16 ASS Anne. 10 t

AROOfINAPUSUC eo' SECaR

PROJSCT113 OF sOLce o4 Us OF RINDs 1969-199S (V?IVIt AL COWA42ES)

(PF 1969 1990 1991 1n 1993 1994 1193 YOAALSOIRMC14% Income 202 2497 2700 35s4 '218 s500 597? 260050epree,.tior 1122 1104 166d 1030 996 963 931 7214Lo-n Term Leone 011 6si 20 -10 -10 323I£n,wwo*1ecv*&*a Current Dobt 6 -102 -to -I? -15 -14 -14 -17

Total Source of Fund* 3315 3656 3769 4s57 5169 5957 6894 33367

Ineaa.ioacr'.a40 Working Caoptal -1820 -1107 -1032 -443 104 613 1699 -17I6Incloseo OUh'r Aaota 216 227 238 250 263 276 290 1760Loan Principal R pey- nt_ 610 154 192 234 25 220 214 1910Interest 854 812 623 a29 eor 763 759 s567Royalties 310 324 S23 332 336 332 326 220sFuol Yon 2132 2406 2452 2ees 2764 2683 2904 18216Ineatebnt @53 640 743 690 669 700 700 5315

rotal U e of Fu-da 3315 3656 3769 4661 5169 59s7 6894 33367

Swus/lb-ovPrczr - 0P

0 de EO3ENe Income 132 go9 179 381 49 A2" 432 2160

0Q rociet;on 263 230 292 301 311 324 331 2=02

Loan froe 108 9govt. =unds for PN Foreign Cabt AX 30 es so 90 102 ILL 514

Ad-ancee for Third Pay%. 1o 1o 0o 1o to 10 0o 7o

Rfl.nuncing (COOASO) 72 69 6S 63 60 57 54 441

7 rAel Source of lunds 24 596 613 601 900 921 938 5293

USEIn*estment 312 ss 260 253 234 221 147 1128

To.-t 23 26 60o t1o 1S6 176 3I

Loan Pot* P-incipal 216 157 162 1l1 11 190 190 t29?

Loon Pats tntareat 65 51 42 34 26 20 1s 253

Changee In Working Capital 104 e6 6 59 11 8 1t 291

Total UJi* of runda 697 6e5 s16 eot t12 60e u4s 4199

SIMPLUSL/-OEPICI - C de S -1la -19 97 194 268 14 093 1094

P0WGI CUWANIESSOLCENot Income -36 2 193 301 417 440 469 1626

Depr&ecition 265 301 313 337 344 331 361 2292

Loon, 349 353 317 205 15 155 216 1752

El-etriclty Fund 142 136 117 g6 9s 99 *oo 794

Energy Funds 318 256 169 134 93 168 249 1434

TOTAL SOLtC OP P1*5 10058 1048 1129 1103 1t06 1233 1424 8098UNEInvestownt 18 777 7m9 716 552 742 9O8 5240

Loon Payments Princivel 293 162 190 252 277 33? 367 1838

Loan Psymanta Interest 300 360 383 385 363 376 8s6 2623

Changes in working Caaitsl -61 39 63 43 s3 -11 -1 119

rote, Ue of Nu40 1352 1338 1398 1396 12es 1444 13o0 9620SUMpUS/-0WIC1T - POW6R COWAN1eS -297 -290 -266 -293 -159 -211 -206 -1722

tAe-',ETA6'AICENet tI.ome 26 147 379 S52

('epeci ation 74 150 153 377Loans 376 29 212 70 82 61 e3 1210Energy Funds 318 360 360 479 393 4*5 234 2519

FTI; y Contributiena 245 305 371 420 490 361 lSS 2347

tots1 Source of Funda 939 963 943 9g7 106I 1194 1004 70es

US'Invoatment 8es 889 836 6ee 204 159 122 4001Lons Paymente PrinciDal 54 es 84 70 84 1S0 198 705L~a.. rayents Interest 124 142 15 165 165 6 ss 159 1078Mi angoo in Vorking Cuvitel -137 -133 -135 -151 612 720 523 130t

l"tal Voa of Funda 939 963 943 977 1065 1184 1004 70e5

John A. Stoddtrtaohc:!/Of'"

5 "

IN MILLIONS USS . Annex 1O.C6

ARGENTINAPUBLIC ENERGY SECTOR

PROJECTIONS OF SOURCE AND USE OF FUNDS 1989-1996 (CONSOLIDATED)

1989 19S0 199 19lm 1993 1994 1996 TOTALSOURtENet Income 2117 2699 3072 4246 C090 6043 7277 30643Depreciation 1682 1676 1664 1699 1716 1780 1767 11924Long Term Loans 8997 80 649 273 229 236 299 3291Increase/Decrease Current Debt 6 -102 -19 -17 -15 -14 -I4 -175Advances from Third Partioe 10 10 10 10 10 10 10 70Energy Fund 633 616 649 643 436 623 483 4033Electricity Fund 142 136 117 96 96 99 109 794Refinancing (CONGASCO) 72 69 66 e6 60 s7 64 441Equity ContrHbutions 288 343 437 486 680 463 26f 2863

Total Source of Funds 6821 6264 e446 7469 6251 9297 10253 53784_____ ……… _ _ _____ ------------------------------ ---------------- …---------------

USEIncre J/Decrease Working Capital -1920 -1116 -1099 -492 780 1C30 2240 -76Increase Other Assets 216 227 238 250 268 276 290 1760Loan Principal Repnyments 1198 639 848 73? 768 897 969 5750Loan Paymnts interest 1423 136C 1408 1413 1361 1344 1299 9621

'0 Royalties 310 824 323 382 836 332 328 2286Fuel Tax/Capital Tax/Incom Tax 2132 2429 2606 2776 2924 3001 3060 19849Investment 2949 2604 2699 2£62 1679 1622 1877 16281-a- ----- ------------------ -- -------------------…--------------------…----------…

Total Use of Funds 6803 6972 6623 7667 8131 9202 100?3 64471- - - ------ - ---------------------- - - - --- - ---- … - ---- - -- - - ---- ----- - - - ------- ---------------------

SURPLUSf-DEFICIT -476 -318 -178 -108 120 96 178 -687

John A. Stoddert:mbc2/12/90

- 137 -

IN UZUISS UN Anne 100.?

AOWINARLIC Sam ST0

otetioNs OP nm: me WiF mom IwO-it5PW CMIZW Ae YACVUEVA

19o 1991 192 193 1994 1995 TOTALP0w2 COWAMC

Net Income 2 1I3 30t d1? 460 469 62sepIreciation 301 313 337 35 351 361 2292Loans 353 317 206 157 165 216 1752Electricity Fund 136 117 96 9t o 109 794Eneg Funds 26 159 164 3 1 249 1434

TOTAL SMCE OF ROS 1046 1;29 3 13 11061 I 1424 60usEInvestent 777 759 716 352 742 906 5240Loan Pay_ntn Princivcl 162 190 252 2m 337 36t7 16wLoan P1ymento Intereat 360 365 335 368 376 3U6 2623Chan"g in Vorking Capetal 39 63 43 53 -11 -1 119Recovery of Enry Fund 256 169 164 ISO 16 249 1434

-_-_----------------------------_-_-----------------------------------------------------------------------------------------_-_------

Totl te of Funds 154 1584 1560 tS! 1612 1879 112S/L-WI-OOPFCIT - POR COlAN-546 -455 -437 -252 -379 45 -315

YACYRETA

Not Income 26 147 379 S52Ogroecietion 74 1JO 133 377Loans 296 212 76 e2 t1 as 1210Energy Fune 360 360 479 393 4r5 284 2519Equity Contributions 305 371 420 490 3S1 1it 2347

Total Soure, of Funds 963 943 977 1065 1194 1004 708!USEInvestment 889 Su 69 204 1t5 122 4001Loan Peymete Prinelial 65 64 70 4 150 196 705Loan Pay_ante Interet 142 166 165 165 16t 159 1076Chanee in Woriting Cataol . -13t -135 -181 612 720 52 1301Recovery of &VerIW Fund 360 360 4*7 393 455 284 2599Inter-et an Eqity et 111 1l6 220 263 262 1132

Total Ue of FPnds 1360 1414 1617 1i67 1912 1U5 1o0t6SRPUiS/OEXCIT - YACtWiLA -426 -471 -640 -613 -716 -516 -7l--- _---------------------------------------------------_------------__---..--__------------------_-------------_------_-------

SOURCE

Net incoe 2 193 301 443 60r as6 2878Veprciastion 3SO 313 387 416 g0t 514 2669Loans 651 629 263 23J 236 29 2961Electricity Fund 136 117 0 9 n 109 795Energy Nnd' 616 549 an 466 623 463 4033Equity Contributione 305 3 420 490 351 156 2347

Total Source of Fund. 2011 2072 2060 2171 2427 2428 15163USEInvestment 166 1595 1o6 7S6 901 lOSO 9241Loan Pryment. Peinclepl 227 274 32 31 467 565 2543Loan Pay_nt. Interest 5W02 541 W 5S4 541 S1S 3701Change- in WorkiY n Capitl -94 -72 -106 6au 709 524 1420Recovery of Energy Fund 86 549 643 486 62 463 403Intarat on Equity 66 1ll 161 2U0 268 202 1132

Total U.e of Panda 2983 29n 3177 30w 324 389 22070SU1VLU/-OMCIT - Plil COe/YACtRUA -972 -926 -1097 -6 -1097 -971 -6867

Electricity Saqoe (T9) 37 40 42 44 4 49RequIred Increase per KMLS 1t 1 MillIs) 26 23 26 20 24 20Current Tariff (USMllIIo) 53 54 So sT sO 59Required Tariff (US59ill.) 79 77 62 77 SS 79

John A. Stoddert/dhc7/29/69

- 138 -

Amex l

These *r .the written commete, on the Draft Green Cover Energy Sectorreport dateod August 10, 1989, received from the secretariat of hnergy InDeceaber, 1989.

COtNhTA1tOS AL ESTUSES lOOL SICTSuhllmA* PSIPAIA"W Po EL

lsace MmusAs(tsfew' *f. 1SflA-)

Re geutte., *e.1e'e de 1969

- 139 -

COWNtTARIOS AL ESTUOEO OtL SECTOR IN161APRECARAOO PON EL BANCO NUISIAL

SECRETARIA OE ENERBIA

lItISTERIO DE OCRAS Y SERVICIOS PUSLICOS

REPUBL ICA ARGENTINA

No@vebre de 1989

(Versideo OralI v14ner , f Icoa - No cItar, ni reproduc1r)

- 140 -

IWTUOSOCCION

I. LA NUEVA POLITICA GLOBAL I SECTORIAL: PUINCIPALES LI-NEANIEN ros

t. MARCO GLORAL

1.1. AntecedentesI.2. Objtivos de corto plate1.3. ubjetlvos de sedlano plato1.4. El nuevo marco legal

2. MARCO SECTORIAL

2.1. Antecedentes

2.2. Objetivos de corto plato

2.3. Objetives de sed1ane plate

2.4. Prlncipales medidas Implementadas y to desa-rrul 1.

2.5. La desregulac1in en el subsector petroleo ygas

1I. SUBSECTOR PETROLEO T GAS: CONENTARIOS A LAS OSER-VACIOWES DEL ESTUOIO

1. La nueva politica de bidrocarburos

2. Prec1o del petr6leo crude

3. Costes de produccl6n y prete1s de transferencla delpetroleo

4. PrecIos ex-refinerfa de los productos

S. Impuestos y subs1dies

6. Oistorsiones financieres en el subsector bidrocar-buros

t. Reforma del sistema tr1butar0 viculeado a lot %idro-carburos

- 141 -

- 8. *eserwas de qas natural

9. Costos, preclos e impuestos del qas natural

Itll SUSSECTOR ELECrUICO: CONEETARIOS A LAS OBSERVA.ClONES DEL ESTUOIO

1. Proyeccl6n de Ia demanda de ener9ra electrica

2. Planificaci6n de las lnverstones

3. Utiltzacidn de cerbdn Para gqenraci6n eldctriCa

4. Plantas de qeneracidn aucleoelectrlcus

S. Particlpacidn del sector prtvado

6. La crisis eldctrica

7. Aspectos financteros del sector electriot

S. Conclmstde

- 142 -

iuuROOUCCIoU

El Gobierno arqentino ha recIbIdo con 1nteres @1 EstudIo sabre

ol Sector Enerqla preparado pop el 8anco MundIaI (en adelante

PI EstudIo). y lo cons1dera un elemento valioso pare Ia formula-

ci6n de un diagnostIco correcto del sector. p para a preparacIon

de propuestas tendientes a corregir distorsiones y aumentar

su produccion v eficiencia.

El Estud1o fue elaborado en un contexto sustantIvamente dIferente

dol actual. Potr llo. si blen en Ifneas generales continha

siendo un aporte vAlido. algunas de sus afirmaciones y recomenda-

c1ones han quedado desactualliadas o relativizadas par la 1nstru-

mpntaci6n de Doliticas, generales o sectoriales. a partir de

Julio pasado. En este sentido. la Secretaria de Enerqia (SE)

considera oportuna una revisi6n del Estudio a a& lot de las

nuevas poiticas en desarrollo. Tambidn es conveniente sefalar

que la SE realizo en su momento observaciones al Estudi Prelimi-

mar presentado por el Banco. las que fueron remit1das en mayr

pasado (Ver Anexo), y en general mantienen vigencia.

La SE comparte gran parte de las preocupaciones sefaladas

oh Estudi1 respecto de la situacidn del sector, coma asimistio

on mucho- cacos el diagnostico de los problemas y el enfoquw

dp las soluciones. Oe hecho. parte de las propuestas planteadas

por el Estu. lo coinciden con medidas ya lnstrumentadas. o que

la SE se propone desarrollar. Sin embargo. el enfoque general

del Estudio no incorpora suficientemente las restricciones pro-

venientes de la instrumentaci1n de las soluciones presentadas.

no solo en cuanto a sus aspectos t6cnicos. sino fundamentalmente

por la necesari4 compatibi1izacion de las politicas sectoriales

con la politica acon6mlca global. En particular, las polfticas

de precios. tarifas e Impiestos par& el sector deben tomar

cuenta de las restricciones provenientes de lo0 programas de

Pstabilizaci6n y de reforma fiscal. y de la situaciOn existente

en materia de distribuci6n del inqreso y nivel de imp1 ea.

- 143 -

Por elIo. las propuestal que involucran cambIos suinificativos

en los prec1os relativos, omod1f1caciones en los flujos finanteo.

ros entre dIstintas areas del sector publlco o entre Oste y

el sector privado. ro pueden ser consideradas nt tormouladas

en abstracto. a riesqo de que se tornen 10Pfacticabl.s o se;n

distorsionadas en s' aplcac3con.

3 El Estud1o coincide con el enfoque quo Ia SE reallia do alqunos

de los grandes Problemas del sector. Las distors1ones existentes

en uateria de precios. Ia "xcesiva imposicidn sobre los b1eones

energeticos. las e%entuales deficienclas en la asiqnaci6n de

las inversion4s en el pasado. y un marco requlatorto Inapropiado.

constttuyen elementos que traban el desarrollo efictente del

sector. Estos problemas se han ido conformando hist6ricamente

a lo larqo do un complejo proceso que involuCra factores ooltti-

cs, eeonnomicos qlobales y sector1ales. Por ello las soluelones

a implementar s. bien son urgentes no Son SimpleS. Consciente

de ello el 'obierno ha lanzado un conjunto de medIdas que

conducen a rcformas estructurales de la economfa y del Estado.

en el marco de las leyes de Emergencia Economica y de Emergencia

Administrativa. recientemente sancianadas. Se espera que Pl

S ctor EnerqAticr jueque tin rol destacado en este proceto de

transformaciones. y en cste sentido se encuentran en desirrollo

tin conjunto do polifticas que se detallan mas adelante. destinadas

a correqir los problemas arriba seAaladoss Por ello is SE

entiende que las recomendaciones -efectuadas en el Informe debe-

rfan contemplar. la nueva sItuacton y ser revisadas a Ia luz

de la misma.

4. En materig de orecios y tartfas de bienes y servicios energeticos.

el Gobierno NacIonal ha dado un Paso decisivo en relici6n a

su fijacion -n rIveles que aseguren un desarrollo adecuado

del sec:or En efeclo la recuperacion en tArmInos realIs

de los precfn¶ onerqAttcos a partitr de Jullo pasado (oroducto

de ajustes nominalos sin precedentes del alrededor del Ia00

). conttituye rl ounto de partida de una sorIe de acciones

- 144 -

que tienden a redeflnir en un futuro cerceno las estructuras

de preclos en un sentido de mayor raclonalidad. enviando selales

correctas a productores y consueidores. No obstante. el sanea-

miento econdmico y financiero de las empresas del sector no

puedo depender exclusivaiente de la polIftica tarifarIa. Se

requteren ajustes congruentes en el flujo de gastos corr1Lntes

y en l& Inversion. y mJs efIcIencia on ga qest10n con el

objeto de obtener una mayor productividad de Io$ recursos disponi.

b les.

S. En el subsector de hidrocarburos. el objetivo es lograr una

rdpida expansinn de las reservas. la produccion y las excedentes

exportables. ' metodo para alcanzar estas metas es el de

la apertura petrolera, fijando los precios locales en relaci1n

con los preclos internacionales. y efectuando con estas bases

una convocatoria de caracter amplio al capital nacional y extran-

Jero. Pasos decisivos en esta direcc1in son los Decretos N'

IO5S/89 y l212/89 los que, junto con la continuidad del liamado

Plun Houston. constituyen las bases de la nueva politic4 de

hidrocarburos de la Arqentina. En el subsector elLctrico.

el reordenamiento institucional en marcha apunta a consolidar

el proceso de sanoamiento economico y financiero ye iniciado.

En este sentido. se procura quo las tarifas pprmitan cuhrir

los costos de operaci6n y mantenimiento, la deprociaci4n del

activo. asi como financiar parcialmente los costos de evpansinn

del sistema.

6. El GobIerno Naclonal tambidn se propone efectuar una reforma

del sIstema de Impuestos v Iente para el sector enerq4tico.

Naturalmente este camblo debe 1nscribirse en el marco mas amplin

de la reforma tributaria global. Actualmente. esta en dehate

un proyecto de ley en este sentidoa que ye ha sido enviado

a) Conqreso NMctonal. Entretanto. es conveniente seflalar una

cuest10n relevant. suscitada por la lecture del Estudlo. sobre

la cual resultA IndIspensable dejar en claro el enfoque actual

- 145 -

de la SE.

Este cuoestdn es la del sistema de transf*renct4s financieras

entre el Sector energia y el Gobierno Central) as1 como con

otros orqanos del sector Publ'co y sectores de Ia comunidad.

Es oprecIso seiAalar que es este un conjunto couplojo. por su

conformacino hist6rica. y los diverso$ niveles ifstttsactona)es

e 1ntereses involucrados. Por ello es conveniente evitar todo

anAlIsis simplista al encarar propuestas de reforma en esta

Area.

7. Es necosarlo diferenciar con todo enfais el covjunto de tributos

y mecanismos do transferencia que conforman el siste.a de Fondos

de Afectacion Esoecif1ca. de los impuestos vinculados a transfe-

renc is entre pP Sector Enerqia y el Tesoro Mactonal. y aun

hac1a otros sectores. que tienen su origen en las dificultades

emerqentes del rpqimen trlbut4rio qloba?.

Es sahido quo la esistencia de Fondos Esoecfficos resoonde

al criterio de redistribuir la renta petrolors permitiendo per

una oarte el desarrollo de la explotaci0n de recursos enerqet1cos

renovablos (a) instituir una suerte de qravamen t aqotaslento

de rocursos no renovables, permitiendo asi una asiqnacidn Inter-

temporal de la renta petrolera). y por l otra el f1nanclamiento

de parte de la infreestructura de transporte, actuando el tr1buto

en este sentido cono un mecani,;mo- sustitutivo del rpgqmen de

p roc Il os .

La eoustencia de los Fondos Especificos ha permltido en 'istintas

etaPaS hlgtdricas la iniciacldn y contlnuldad de importantes

obras imantentendo los n1veles de Inversl6n deo sector ain

en #Pocas de crisis fiscal y de cafda de la Inversl6n oublica

global. como Par otra parte el mhsmo Estud1o lo reconoce. Se

ha mostrado en consecuencia co*o un mecanlsmo eficaz. s1 bien

no caben dudas de nue es inprescind1ble incrementar su oficioncia

y dotarlo de mayor fletfbilided. aumentando el retorno de lo's

recursos pdblicos Involucrados.

- 146 -

q. Por otra parte. en cambto. es necesarIo mod itIcar el esquema

tributarto que fpesa sObre el seector. y que estS destinado a

resolver problemas fiscales en el corto platao en auullio de

un regimen impositivo qeneral que se ha mostrado ineficat y

declinante. La euistencia de estos lmpuestos desnatttraliZr

el riqimen de precIos del sector. e introduce distorsiones

de distinta indole, con sus consecuentes Perdidas econofficas.

Constituye en consecuencia una aspiracidn de Is SE modificar

sste cuadro de situaci6n. aunque naturalmente existen restricc10-

nes en tanto este ob jetivo debe ser compatibili2ado cnn Ia

polItica f1scal n su conjunto, en el marco de la reforma

tributaria en preparacion.

Los cambios en las estructuras de precios e impuestos lenen

como obietivo, Ademis, la eliminaci6n o 1imitac1on de Ins subsf-

d ios canal Izados a traves del sector enerq tg co r las empresas

,,acionales quP n e l operan. En este sentido. muchas do l&s

observacinnes dol Ranco sobre este pionto ya han perdido viqencia.

Aslmnsmo. mprecen reparos metodoldqicos o suscitan dudas an

cuianto ; su monto. alqunos conceptos definidos en el Estudio

comn suibsidio. Este es oin tema que resultarS conveniento discutir

con mayor detalle.

int tro tema presentado en el EstudIo cuya revis In es Imprescin-

dible a la luz de las nuevas ctrcunstancias. es el con junto

de proyecciones financieras presentadas (1989/95). Estas

Se encuentran relativiladas por varIos f4ctores: cambios

importante. en los1 Iec1os respecto de 14 fecha base 'tilhzada

(diciembre 1998); qodificaci6e de las ooliticas subsectoria-

les (sobra todo en petroleo y qas natural); redefinicidn

del Plan -ie Expansl6n del Sector Eldctrico y de los olanes

de inversion de l as emoresas de combustibles. Por atra

parte aparecen rubros en las proyecciones que a luIcIo

de 1a SE deben ser rovisados (por e jPmplo los Ilaam&dos

comprom1sos vinculados a1 NEUSA tI).

- 147 -

11. Un ultimo aspecto rue merece un comentario general es el

del marco Instttucloena del sector energqtico, y en oartlcu-

tar .1 cuadro de relaclones JerIrquicat entre el Gohlerno

Central y las empreses nactonales del sector. El Gobierno

NaclanaI ha iniclado un oroceso de reforma que tiende a

correqir Problemas como el de la suoerposlclon dr competen-

cias y la ausenc1a de un marco cIar a Paa la insercion

de las emprosas prtvadas. y a reforzar por otra parts los

mecanismos de control ofectivo distinquiendo claramente fun-

clones y responsabilidades par& el sector publico enerqetico.

A tales efectos se han Instrumentado ya varias iniciativas

que se detallan mis adolante. Las recomendaclones efectuadas

por el Estudio en este tema si bion van. en lnees generales.

en la misma direccidn que la politics Iniciada por el Gobler-

no. requieren todavia son desarrollo de detalle. pars resultar

verdaderamente utiles en relacldn a la preparaclon de pro-

nuestas ei ton sector que abarca cuestlones institucionales

de cran complejidad.

12 En el presente documento se presentan comentarios al Estudn.

aqrupandolos en grandes areas tematicas que aprotimadamento

se corresponden con el orden de presentacidn empleado en

el Estudio. Antes de abordar las cuest1ones sectorialas

especificas. en el Capftulo I se efectua una breve prespnt4-

c10n del marco general en el cual se Inscriben estos comenta-

rios tanto en los aspectos qlobales como de las politic4s

del sector.

- 148 -

1. LA NUEVA POLITICA CLOBAL I SECTORIAL: PRIUCIPALES LINEA"ltnIoS

1. MARCO GLOBAL

I.1. Antecedentes

El traspasn -delantado del Goberno el 8/I/89 se realzd

en un marco de elevad1sima inflactdn (196,6 * foe el Incremen-

to del IPC *n JuIio) y fuertes desequ1ibriOs a nivel macri,.-

con6m1co. Principalmente deben seRalarse: bajo nivel de

reservas y retrasos en el sector externo; alto nivel det

d4ficit fiscal agregado; coefictente do sonetitaci6n en su

nivel hfst6ricamente mas bajo; cafda del nivel de actividad

y del salarIo rea&; retraso tarifarIo. y disminuci6n de

los niveles de inversidn piblilca.

12. Ob2tblvas de corto platO

En funcidn de la s1tuac16n descrlpta. las Polfticas definldas

por el qobierno Naclonal para el corto plato estin destinAdas

a alcanzar basicamente los siqul.ntes objetivos:

1) reducir drSsticamente la tasa de Inflacidn.

1i) alcanzar rapidamente una s1tuaci0n fiscal financieramen-

to equilibrada.

111) nor.. lzar e' funcionamlento del sistema financiero

y del sector externo de la economfa.

Iv) rocomooner les precios relativos consistentemente con

los objotivos persequldos.

v) atend^r en forma perentoria las situaciones de emerqencia

social .

- 149 -

1.3. Ojtvsd otf@..!Z

Slmultneamoento con las Polfticas de estabtllzacidn aolIca-

das el Gob1erno Nacional estJ desarrolIendo un conjunto

de iniceativas (algunas do las cuales involucran al Poder

Legislativo) que debon senter las bases oara transformac1ones

de caricter estructural de la economfa.

Estas politieas pueden aqruparse en grandes ejes:

i) la Reforma del Estado y la redeftntcidn de su rbI

econdmico. en el sentido de una menor participaci6n directa

v la desrequlaclon proqreslva de las actividades econ6micas.

i ) la transformacidn de la estructura productiva en 14

direccion de uns economfa ads comoetittva. ablerta y orienta-

da hacd. un crecimfento de contenido exportador.

1.4. El nuevo marco leoal

Rpclentemento fueron sancionadas las dos leyes que constItoi-

yen los instrumentos b4slcos para impulsar las roforeas

estructurales a nIvel del sector PUblicO. Estas son Ia

Ley de Emerqencie Administrativa y Ia oey de Emerqencia

Econd6mca. (ver Anemo tl)

La reforma tributerta. que serJ instrumentada a partir de

una nueva ley cuyo proyecto ha sido enviado al Conqreso.

constituye un tercer elemento esencial.

Los prfncisales contenidos de las dos leyes ya viqentes.

en lo que t1ene relac1n con el sector energfttco v que

se encuentran en eJecucldn. son los siqulentes:

1) Oeclaracion del estado de emergene1a de la prestaci4n

del servicio oiblico. la ejecucl6n de contratos y la sltuacion

econdmico financlera de las empresas pdblicas

- 150 -

2) AutorIaiclon l Poder EJecuti veac1onal par- la interven-

cI0n de las divrsas emoresas J orqansImos Ddbl1cos. con

facultades Par& renr9en1iar protisorifaent. los entei V

transformear su forms juridica.

3) REqimen de emerqencia oara los contratos y obliqaciones

ecigibles del Estado y sus empresas y entes.

4) Suspnnsi6n do todos los subsidlOs y subvenciones que

afecten Ia ecuaci6n econ6mico-fisonciers de las empreses

estatales. v sometimiento de so asntenistento eventual a

Cnnqreso, cnnvenlentemente *xpltcitados e inclu1dos en el

Presupuesto Facional.

5) Smplificacldn de los procedimentos de privatizaciAn.

ampliacion del r#qimen de concesl6p de obra pdbltca y fomento

a la incorporacin de capitales privedos a la-prestaecl6n

de servicins publicos.

61 Facultad al PEN (ad referendum del Congreso) para disponer

la derogacidn de normas que establetcan orvtileqios o iupidae%

la desrequlacidn o desmonooolizaecdn de los servictos.

7 Creacion de los Programas de Proptedad Participada

en las empresas estatales oara empleados. usuareos y provee-

dores .

8) Suspensidn del Compre 4a&conal y del Contrate Naecional.

q) VInculacIon de los oreofos de referenc1a para la liqulda-

cion de las regalfas petroleras y gastferas a la cotizacion

Internaci .nae de una canasta de crudos (hasta 80 del oreclo

Internacinnal para el petr6leo y 7OS para el qas a equivalen-

cia calorica). y establecimfento de la opcidn de su Paqo

en hidrocarburos de libre disponlbilidad.

O0) Cre4cfon de la Empresa Federal de Enerqfa El4ctrlca.

que involucra a A y EE. HIORONOR y la generaci6n de enerqia

de otras amprps4s nacionales.

II) Creaciin de la Empresa Nec onal de Combustible (involucr2

a fPF. r(,a del Estado e VCF).

12) Estab lecm1iento de concesiones, asoc1aciones y/o contra-

tos de Iacacl6n en Areas de ewoloraecl6n y eiplotacilSn a

cargo de YPf, y estahleClitento, de soctedades mustes pare

dreas de reeqperacl6n asistfda.

- 151 -

13) Prioridad a1 Sector cooperat*vo kpara I event,al tranife.rencIa de concesiones en la etp&a de dlStribuCl6n de los

serviclos de enersla el#ctric&, actualmente prestjdos por

SEGBA y A y EI. y de qas natural, a carqo dO Gas del

Estado (tambldn eventual transforencla a Jurtsdicciones pro-

vincilaes a municipales de las redes de diStrlbuci6n. conve-

nlo medlante).

14) Declarocian de empresas mextes oetroquflicas y carboquf-

micas coma suijetas a orivatizacl8n.

MA. AQCO SECTORIAL

2.1. Antecedentes

La situaci4n del sector enerqdtico al concluir el prifer

senestre de 19R9 estaba caracteritada por: subsistencla de

las caus4s que obliqanal racionamiento de la enerqia electri-

ca; fuerte cafda de proecIos y tarlfas en tdrminos reales;

pronunclados desequilbrias financteros en las omprosas oti-

bIlcas 4de sector; dificultades operatlvas como consecuonc a

del desorden en el desarrollo de los contratos con torceros

provocado por la alta InflaciOn y alteracinnos dramatic4s

en los oreclos relativos; 1ncromento de Ia mora comerciil

! de las nmoresas estatales con el sector privado, y de tos

saldos de deuda impaqos oriq1nados en transacc1ones entre

ewapresas pgbl icas.

2.2. Objetlvos de corto plaso

En esta nrimera etapa. las autoridades del sector se han

propu.stn. dentro dPI marco de polftica giobal ya selalado:

I) Revertir la situact1n eco6mi1co-financlera del sector.

en primer luqar a trav4s de 1a recompisici6n dristica de

- 152 -

los niveles *eales de preclos y tarifas, y de otras medidas

corcurrentes.

11) Avaniar en el reordenamiento orqanizativn v operativo

de las emprosas nacionales a traves de las intervenciones

dispuestas en cada una de ellas.

III) Ajustar todos los aspectos operativos conducentes

a a minimlzacion de los efectos originados en la limitacidn

de la oferta electrica.

iv) Acelerar la puesta en vigencia de los Contratos pendlen.

tes de aprobacidn correspondientes al Plan Houston.

2.3. Objetv _os de medlano plazo

Las metas a alcanzar en el corto plato Peruitirn establecer

bases s6l1das para el desarrolgo de politicas de mis larqo

alcance. En este sentido la Secretarfa de Enorgia ha estable-

cide alqunos critertos que permiten enmar-ar la definiciin

de las politicas y planes del sector:

i) el mantenimlento de los precios , tarifas en tOrminos

reales. base sobre la cual se trabajari en el reordenamiento

de las ostructuras de precios oar, correqir las distorsinnes

existentes.

11) el saneamiento econdm1co-financiero de las emprosgs

publIcas a partir de la aplicaci6n de Ios Instrumontos

emerqentes del nuevo marco leqal en una perspecti-a de

exoans06n sustentada sobre la base de financiamiento geniine

(incluyendo la utilzacion de alternativas de financiamientc

no tradicionales).

iii) 1 busqueda de una mayor ef1eoncla producti v et

las emoreq%s pubilcas, haciendo Onfasis on la adecuacoIr

de su flujo de qastos v el aumento de Is productividad.

Iv) Ia redeffnlcion de Ias prioridades de inversi6n

asequrando la continuidad de los grandos proyectos on ejecis

ct6n. a la vet que aplicando estrictos criterios econ6mico

pare la selecclon de nuevos oroyectos, y pri vleqlanndn 14

- 153 -

soluciones de mtnimo eosto y la austerIdad.

w) Ia redef InicIon de las reglas de juego en el subsector

hidrocarburos. a fIn de crear condIcIones par& una r4pida

expansidn de la producci6n y la exploraci6n, amPlear las

areas de participacidn de las emoresas 'privadas. y alcanrar

un funcIonamiento mis abIerto y menot requlado de estos

mercados.

vi) el reordenamiento Institucional del subsector electrico

atend'endo a su caricter ttcnico integrado y a la necesidad

de coordinar oolftlcas y estrategas en todas las etapas

del servicin piblico de electricidad, estableciendo los can;-

les adecuades de vinculacidn entre 14 jurisdlccl6n nactonal

y las jurisdicclones provincfales.

2.4. Princ!paaes medidas implementadas e in desarrollo

En el mmarc de los objetivol lIoblIes y sectorIales enuncia-

dos. a pa rtir do julIo oasado han venIdo Instrumentandose

diversas acciones en el sentido de los objetivos enunciaclos.

algunas de carScter general y otras de tipo subsectorial.

Las mas importantes son:

1) reajuste taritario tendiente a asegurar en una primora

etapa el cubrimiento de los costos operativos de las empresas.

El Incremento real oromedio de'las tarifas eldctricas entro

junIo y aqosto de 1989 fue de 279S en el caso de A v

EE. de 256$ en el de SEGSA. y de 2731 en el de HIORONOR.

En el caso de las empresas de combustibles. sus prectos

y tarifas ;* 'ncrementaron en forma real en 242% para VPF.

238t para G as del Estado. y 2821 parea CF. En todos

los casos osts recuperaci1n real Implico aumentos nominales

cercanos o s.joeriores al 1100% promedio en el periodo seflalado

(Ver Anexo 1.

2) la suippnsi6n Por 180 dfas de subsidioS y subvenclones

canaltiados a trav#s de las empresas y organismos *statalps.

- 154 -

El MOSP y la St estEn revitsando of conjunto de subs1i1os

y tarifas especIales otorqados pop A y EE, HIDRONOR y SEG6A

on el suministro de *lectricidad y rieqo. fn de establecer

en cada caso s1 corresponde el otorqau,Iento excepcIonal

o su ellntnacidn. tgualmente part 1as empresas del subsector

combustiblts.

3) se establecio que los preclos de venta de los combustibles

no podran ser menores que el valor de retencidn fijado

para los oroductos de origen nac1onal.

4) sp Pstablect4 que es intenctdn del Gob1erno Mactonal

iImttar los aportes del Tesoro Hactonal a las empresas

a partir de octub.e de 1989.

5) conformacidn de un Fondo Unico transitorio administrado

por el MOSP integrado por los recursos remenentes de la

desafectacIon de parte de los fondos do asgqnac10n especffica

(5(1 por 1R0 dfas y 201 hasta el 31/12/90). Estas medid3s.

destinadas a flexibilizar el manejo de los recursns -n

Ia emerqencia. no interferirdn en el desarrollo do In

proyectos en construccidn para la espansi6n del s t-mt

el Ic tr I co.

6) PlabaracIon de un reqImen de ComoensacIdn de cr 41 ds

y deudas entre organismos del sector publico. al 30/6/ 6

incluyendo entes de cardcter provincial y municipal.

7) suspension de las designaciones o contrataciones cuando

ellas impliquen Incremento del gasto en personal; amoliacti n

do las facultades para la reubicacI6n del personal de lis

empresas y entes. y revIsI6n de los reqgmenes de emnlIPo

a efectos de correqir los factores que pudieren atentir

contra los obletivos de effciencte y productivtdad.

8) preparaclon d^ un acuerdo tnterjurIsdIcctnnal paa r n

reordenamlonto del subsector electrico, a Suscrfbir ent re

el Gob1erno Nacional y los Gobternos Provtncteles.

- 155 -

9) preparac1on de propuestas tendlentes a qarantigar la

cobranza par la prestacton del s@rvicto electr*co. on el

*arco de las dIversas medtdas que redeftnen la relact0n

financiera entre el Gobierno Nactonal Y las jurtsdicciones

provinciales.

Z.S. La desregulaclon en el subsector tetrOle o gas

La fuerte rpqullcion existente en Is Argentina en el sector

energqtico. ha resultado en un elevado costo para la econonta

del pais y distorsionsdo la astqnact6n de recursos.

La actividad oetroiera -estatal y prtvda- se hadesarrolla-

do sobre la base de normas ad-fnistrattval dtr1gtdas a

asequrar mercado y gananctas descutdando. en general. al

usua ro.

La desrequlclon del sector tmpiIca un camblo profundo que

necesita uina base de consenso en la op1nton publica v entre

los actores lnvolwcrados.

Preclos oara el petr6leo y combastibles fijados sequn Pl

costo de ooortunidad faciitarJn el proceso de desregulaclon.

eje de 14 pooltica del Gob1erno en este subsector.

La nueva politica tiende a cambtar Ia estructura monop6lica

u ol9oodlica del mercado, Procurando una atomlzaci6n de

Ia oferta. En este sentido el Poder Ejecuttvo ha sancionado

los Decretos N- l055/89 y 1212189 los que. junto a la

ratific4cidn y profundiaaci6n del Plan Houston. constituyen

of ounto .e arranque de esta nueva polfticea.

Los cambios centrales introducidos por etts DOecretos. son

los siqul.ntes:

- 156 -

1) Se fIjaa los olazos y Condlctonos Pril oroceder a

Ia dasrequlacton en el sector de h1drocarburos (a oartir

del I/I/91 o antes si so alcanza un volumen de R millones

de m3 de petr6leo crudo de libre d4sponibilidad). orivilo.

qiandose los mecanhsmos de mercado eara la d.tormlna.cion

de prec10s. cantidades y margones en las distintaq otapas

de la actividad.

7) Se establece IA comPetencla como pr I aCIa basico.

on iqualdad de condiciones para las empresas pubIlIcas y

orivadas. Los Drecios se orientarin haCea los de lndtforencie

de exportaci5n. se eliminarin las cuntas do crudo. vse

Ilberarg Pt cnmercio extorior de hidrocarburos.

3) Se d ion n uin reqImen transitorio de asiqnsicin de

crudes.s de precIos e Impuostos y de importaciones de hidrncar.

buros hasta el inicio de la plena viqencla de la IIbertad

de prec1os en on subsector.

1) El precin del gas natural so fijard a industrias (una

ve. fIni IIdo pI operiode do transicl6n). el bas. at 9 0

del prec in de11 fuel-oIl. y Al dp venta a usuarios rosIdencia-

Ips se dpterminars en base al orecI a*l productor. mAs

los costoi de acondicionamlento. transporte y distribi,cl4n.

El precia 41 productor sera fIjado sn base al criteria

de 'net-back", con costos de acondicionamiento y transoorte

rpferpnci4dv,s a valorps internacionales.

%) Se f ia isn olato de 6 meses pira la neqociacldn ante.

YPF V contratistas privados de los contratos do explnt4ci4n

y otros en los que vPF se we obliqada a recibir los hidrocar-

buros extraldos (con excepcI6n de los del Plan Houston).

con el ob)jto do transformarlos en concesiones de ries-o

prl vado.

6) Se es thlpcen las bases y plazos part la adjisdicacIon

par licitac'iln internacIoneI. de ireas de Interdr siacunda ri

4ctualmenta en m4nos de VPF. Estas areas seran adjudicadas

a la empres4 (niclonaI o extranjera) que en coda caso ofrezca

PI mayor monto en concentn de derecho de explotacinn.

7) El paqn do lI derveho de esolotaci6n son a 1 conteio.

y los htdrocarburos producidos serin de libre dispftlnbilidId.

Se establ,con las bases y plazos para quo VP! convoqup

- 157-

a concurso publico internacional a ffn de asoc1arse con

espresas prIvada&s con el objeto de explotar conjunta&mente

areas de recuperacidn asistida. La asociacidn ser4 concreta-

da con la empresa que ofrexca el mayor monto Pn concepto

de derecho de asociacion. El page del derecho de asoclaclon

sera al contado. Ios contratos tendran una duriclon do

hasta 2S aAos. y el porcentaje de hidrocarburos producidos

que corresponda a los asociados privados sira de i bro

disponibilidAd.

8) Se establece la libre disoon1bi1idad de lot hidrocarburns

Provenientes do las conceslones reqidas por el Codiqo do

MinerIa. de Ios oroducIdos a oartir de los contratos estable-

cidos a oartir de o0s Decretos t055/89 y 1212/89. y de

equellos obtonidos en el marco de contratos correspond'entes

al qutnto lla m4do del Pla onHouston (en *ste caso a condtc in

de reducir los Dlazos de prospeccI0n y explorac06n orevistos

ortqinalmente). En Igual sentido. t&mbi#n la modificac1On

a la Ley do Hidrocarburos introducids por la Ley de Emerqencia

Fcon6mica oermite a las Provincias comercializar libromente

eh oetroleo recibido como pago de las reqalfas.

°) Las provincias productoras de hidrocarbearos podrjn oarti-

cipar. en asnciacl6n con emoresas privadas nac1onales n

avtranjeras. el las lcitaci0nes do areas comprendidas Pn

.ii tprrltnrins.

's) Se redjcen sustantivamente los impuestos de asignacinn

espoecfica aplicables sobre los petr6leos crudos destin4dn;

ah mercado interno, y se exceptua do los mismos a lIo

petroleos imoortados para su orocesamiento y reexportaclon.

I I La instalscldn de nueva capacidad de refinacion y

de nuevas bicas do expendlo de combustibles sera Ihbre.

Se establec. asImIsmo. ha I1bre titularidad de ha5 bocas

de expendio. unA voz finahlitdo el periodo de translcIn.

121 So asolura a *PF Ia necesaria autonomfa de qestinn

oara compet;r adocuadamente con las empresas prIvadas. Asi-

mitmo se cr04 ujn Fondo en la orObta del HO y SP pare

fInancIar Ihns ornlram4s doe nversIon de VPF, a intpqrar

con el prnducido de las ventas de iroas secundarits y 'o

'erechos de asociaci6n.

- 158 -

I I . SUISECtOT PETROLEO V GAS: CONENTARIOS A LAS O@SEIVACIOUES

OIL ESTOSIO

1. La nueva polftica de hidrocarburos

Como ya so maniFesto anteriormente. el Estudio fue realitado

en un contexto totalmente distinto del aCtual. Por lo que alqunas

de sus recomendaciones ya han %ido superadas por la dinimica de

la qestion del nuevo ooblprno constituctonal. Esto es particularmen-

tr cierto en el casn del subsector de petrlea y gas paras e

ciial el Estudio describe el modelo quo rigi6 en los ultimos 25

aflns en el Oats; cuyo obJetivo explicito era el autoabastecimlento.

siondo la politica 4e exoansion de reservas era congruente con

este objetivo. En tal contexto el petr6leo era un blen practtcamente

no transable Internaclonalmente. en tanto la dispon1bilfdad de

caPitales Permitit a VPF mantener un adecuado nivel de reservas.

El nuevo modelo qup ahora se Imoulsa propone un casblo cualitativo

a Partir de la convocatorla al capital oetroloro .acional e Interns-

c1onal. N.cesariamente esto Implica adecuar las reglas de Jueqn

de Ia industria Petrolera a las oautas viqentes a nivel internacio-

nil. 1ncluvendo 1a posibilidad de Importar y exportar libremente

c'rdo y derivados.

E1 objetivo de esta politica es alcantar una ripida exoansion

do la% reservas. 1a producci6n y las exportaclones de hidrocarburos

liquidos y qaseosos. De esta manera ser4n evitados los cupllos

de botelIa que podrIan Presentarse en los or6xitos ahos. cnmo

consecuencla de nivoles insuficientes de incorporacion de reservas

7 de creclalento I^ la prodiscci6n de petroleo y qas.

Pars alcanzar astos prop6sitos es necesarto incrementar las

1nversiones en I1 explorac16n y exolotacidn de petroleo y qas

y en el tratamin'-t.o. transporte y distribuci6n de gas naturtI.

Ests expansion do 1i inversiOn serd posibilitada por la ex!stencit

de nuevas reqlas do i-vo an *I subsector. esencfalmente:

- 159 -

I) 1a alIneacioet de los PreCIos del PetroleO CrudO. del a4s y

los subproductoe con los prectos Internactonales.

Ii) la desrequlac1on de tos diferentes mercados (oroducc1hn.

refin4cton. distribuclon y comerc10 extertor). y la elimina-

cl6n de subsid1os.

iii) la ampla1c in d° la participac1on del capital orivado. con

la lncorooracion de empresas privadas en areas del neqocio

Detrolero hasta ahora reservadas al Estado.

1v) la aolleacin de un esquema impositivo constistente cqn el

funcionamiento abierto V crecfentemente desregulade del sub-

sector.

Respondfendo a estos principlos ya se ban tomado. o se encuentran

en vias de desarrollo distintas medidas (parte de ellas fueron

yA seOalodas en 1 7 %.anteriormente). Las mas impo@tantes puetlen

sintetizarse como sique:

1) Recuoeraclon ael nivel real de los precios finales y al orodujctnr

del crudo. qas natural y suboroductos. retomando en consec,snecii

la tendenc1a ini.I ada en 198I de alineacion proqrefiva cnn

los precf0s intornaclonales.

2) Suspension de subsidios otorqados por las empresas PoblIc i

del sector a trtves del sistema dr precios. limitando los mismns

i las tarifas subvenctonadas con destino a los sectores sociales

de menores recurios.

3) IntroducciOn de I Itbre disoonibilidad de los hIdrocarbures

producidos por empresas privadas en una ser1e de contratos

- 160 -

d§e nuevo tioo. refer1dos a la eoplotaci6n do gross seCundarias,

areas do recuperacion asistida. y Sta. rondo del Plan Houstong

y a partIr de la reconversidn de loS actuales contratos de

explotacion y serwvicos.

4) lntroduccidn de la posibilidad de pago de las reqalias a las

provincias productoras en hidrocarburos de libre disponlbtlidad.

s) Fijscion de un programa de desrequlacion amplia de la industrla.

nptrolera. con pl establecitiento de un rdqtuen transitorlo

hasta el 31/12/e0 o antes si se alcantan 8 miIlanes de 3

de petroleo de Ilbre disponibilidad.

6) ModifIcacion del squema tributario vfqente pare el subsector

Pn forma consistente con la polftica de aperture y desrequlac16n:

rpduccion sustantiva de los impuestos de asignaci1n especif ica

sobre el crudo y ellimnaci6n de Ia laposicion a las exportaciones;

qenerallzacion del IVA al petroleo crudo y todos los subproductos.

A la tuz de esta descripci6n de la nueva politica de hidrocarbu-

rot, resulta evidenLe que el contenido de muchas de las recomendacin-

nes Pfpctuadas en el Estudio es recogido por las medidas en marcha.

Sin embarqo. alqunos aspectos puntuales del Estudio referidos

a este subsector j.astifican. por su imonrtancia, comentarios especi-

fIcos. los que nat.r4lmente deben enmarcarse en el contexto do

la politica mAs genorat que se describi6.

2. Precio del petro;eo crudo

A partir del afAo 9qq7I con P1 Oecreto lJS8 y luego con el

Decreto 985/88. Io pr.cios *IP transferencia de los petr6lpos

loate s Son fijadon. jequn una oscala qradual. on vinculacion

- 161 -

con los orec1os do una canasta de petroleos de relegencje en

el morcadeo undial. Pare el a lo 1989 c or rPonde aplIcar el

832 de ese precio de referencia.

Puede afirmarse que con exc cIon de1 segundo trimestro de

1789 so ha mantenidn esta alineacidn. Sin embargo, la oaeri.ncia

demostro que han elistido dificultades pare sostener una determinada

oaIftica 0e prPcios par e I sector en el con teuto aecroeconomica

del palf.

Algunas de estas dificultades son de caricter administratIvo

(por ejemplo. felta de coordinacion entre las distintas dependenclas

del qobierno). otras relativas a ooliticas moplementades en materla

camblaria. fiscal n salArial.

A pertir de j*blio 89, dentro del conjunto de ajustes practica0os.

*I qoblerno retnma ese alineacidn ausentando los procios de los

petroleos en un q362 (en australes).

Al1mismon s# elimina el subsivio sobre los combustibles lquidos

isados par las usinas el4ctricas.

La situacion actual dp preclos puede apreciarse en el siouiento

c is ad ra:

PRECIOS OEL PETROLEO 0RUO Y SIJ RELACION CON PRECIOS INTERNACIONALES

RELACION PREC10ILOCAL/INTERNAClONALPRECIO ACTUAL (en %)

P(TRQOLO rtPO a, MSd Sin imouesto Con impuesto (2)

Sta .Cruz Norte 41600 12,04 72.5 70.' 79.7 17,1Neuquen 5S230 12,92 77,8 76.0 85.5 R3.6

N(ITAS: (1) Tion do Camhio: I USS A 655(2) Impuesto al 4orovechameento viqente hasta el Qecretn

1055187: lot sobre el preclo del petr6leo.

- 162 -

La aliCuott del Imouvsto a I rocesamiente ha Sido reducida

a partir del Oecreto i055/89 al 0ZS, aplfcablo Sobre loa precfos

FOR de lOs crudos procesados pare 4bastecer al mereado 1nternn.

Sobre 'a base del orocesamiento de 26 S 4 m J /daAo, so reduee

aproximadamente entonces de 211 7M UIS/afo con la anter1wr4 afcuot4

del 0I a 4.R4 MMI USSIafo ( tomando a 13 U$S/bt.).

Ademas. el misme Docreto elifin6 este ImpueSto y los derechos

de Importac10n y ewnortaefon para los casos de 9ImprttclGn

tomporaria para orocesar petroleo por cuenta de terceros. a fin

de mejorar lat condiciones de esxortacion de eroductos refinados.

3. Costos de produccion y pree1 de transferencia del petroleo

En el Estuad0o (Ca4p lit) se afIrma q o los precIos de transferen-

cia del petroleo it companies privadas estan por debajo de la

psridad internacional y de los costos de YPf. y que aquellos

no tienen v1nculacidn con las regalfas.

Es conveniente realizar alqunas aclaraecionos respecto de esta%

afirmaclones

a) El Estud1o calcula el costa financiero del oetroleo en It 1.

USS barr. Slin embargo. contrariamente a lo que all1 -I

af1 erm:

- por lo menos durante el perfodo 1986/89 (excluldo el Zdn.

trimestre de 1989) los prec10s de transferenc1a resultaron supe-

niores a dfcho costo. (Ver Anexo V.I.)

Los preclos de transforencia en 1988 resilteron suoeriores

at costo de ooortunidad (precto de exportacidn promedlo anual

12.33 IIIS/barril). fuente: Roletfn de la Subsecretarta de Combus-

tibles )

- 163 -

(I costo financeIro de l1.06 UtSS/barrII. Inclo 4A compra

por parte de TPF de un trC to de la produccion Provenlente

de prOductores priwedos que oPeran b4jo contratos de servicio.

Cuande los precios de est0s contratos superaron el orecio de

transforencia del petroleno el tesoro NacIonal suministro a

YPF una co.pensactdn pop Is diferencia.

Coma este subsidio del Tesoro Macional a las operadoras privadas

que por otra parte allenta inefictencias y prowoca una mala

astgnacton de recursos. ha s1do omitido en el calculo del costo

de VPF realizado en el Estudio. este resultara inferior a lot

11.06 IISS/barril una vez deducido el aporte del Tesoro Mactonal.

b) A la fecha en oue el (stud1o fue real1zado, deberts heberse

adootado como precio part el petroleo, el preci0 de transferencia

(FOB puerto de "mbarque) mas el lOS de Impuesto.

En tanto este imni.eito for ma parte del prec1o del petrolen.

e?l orecto a refinor1a considerado deberta ser entonces de 1I. 4

OJSS/barri1 * 1. 1 * 12.63 USS/barri1.

Subre la base do los precios de exportacl6n del alo 198R (12.33

tI1S/barril promod1o anual) y tenfendo en cuenta lo antedicho.

es incorrecto afirmar que las refinerfas privadas hublesen reci-

bido un subsidio deI orden de los 107 mill. de UJS/aAo.

c) F1nalmente. considerando un costo de 11,06 UtS/barril tampoco

rosulta evidentp que hay& sIdo benoficioso producir para la

exportaclon. o '1'ae so hayen oordido oportun1dades de Ia maqnitid

de las selalada% an el [studio.

- 164 -

4 PrcIcos es-refinerfa de losroductos

LOs walores tanque en refineria fijados por la SE. a partir

de julio '89 tamb1tn se encuentran alineados con los internacionales.

si bien a esa techa no se habian Iijado atin Criterlos exuplcitos

de vinculacion coma suqiere el Estud1o. (Ver Aneso V.2)

E1 va menclonadn Dpcreto 1212/89 avanta en a expl1citaclon

de estes criter10s. que en qeneral son coincidentes con los que

P' Estudio reComienda.

El enfoque basico Parte del principle de que los prec10s del

petrolee V productos deben reflejar esencial'ente sus eostos do

oportunidtd: tanto Pi valor del oetroleo coma el de los productoe

se fijaran en sus valores FOB de esportac6n ("border pric.s).

A os valores ex-rofinerla se suuaran los gastos de couercializacein

para obten-r la rotencion total.

Estas sefales de precios son un paso necesario Dara desreqular

Pl sector y fleuxbilizar. cuanto antes. la participacion en PI

comercto internacional mediante la exportaci6n de derivados.

DP esta forma. Ios mArqenes de refinaciOn quedar4n ligados

Inos Internaclonales. Sin embarao. debe tenerse en cuenta qUo

las Pmaresas refinadoras argent1nas. agrupadas en una c4mara empro-

saria. roclaman pormanentemente a la SE y al MOySP mayores mArqenos

que cubran SuS costos y amortizaciones mas una qanancia ratonable.

Los marqenes etfstentes duranto los ultimos ahos, por encima do

los internacionales. no cubren las aspiractones de la industria

local .

Por to fenos durante el ultimo aRo. los valores ex-r.flnpri4

do los productos han estado per arriba de sus nrecios de exportaci6n.

Las companias prefleren vender en el morcado local. con rebajas.

a oxportar. Sequr4mente influve el hecho de que tienen asignada

una cuota fija de petroleo.

- 165

Oel ssmiso modo, los proc0l5 Ox-reflneroa de la Raft& vtrqen

y gas icuado para uso petroqulmtco: @uporam Sls cestos do oPortusi-

dad (los Procios de las ipo@tationes5 dt naftas y gas Iicuado

de los allos I9S y 1989 fuoron sensiblesente Interfetes a los

vatro't on tanque). En ambos casos osto Osobreopreclo es subsid1ado

oor of Tesoro Nac1onal (Resolucton N^ tOS).

S. Imauestos y subsidios

La reduccion de los subsid10s es parte de la politics fijada-

oor PI oob1erno.

En Julio/89 se Pllmno #e subsitilo a travis del precio de

lol combustibles liquldos que beneficiaba a las usinas del serviceo

publico. Iqualando el precio a la retenctis.

La Ley de Emorqpncia Economica ell* naf aquellos subsfdios o

egenciones autorizados por la Ley de Impuestos a los Combustibles

(por PJemplo. no permite fljar precios infertores a las retene1nes).

Asimismo. otros subsidios tambien desaparecon.

SIn embarqo. no so cemoparten los criterIes y noomna de los

denominados "subsidlosm en el Estudlo. (Resumen Ejecutivo -Ap.

8). Se confundo alI1 subsIdIcs con transforencias de fondos.

mezclando Ios que "paga VPF con los quo soportarla el Tesoro

jacienal. Coao se dfjo mas arriba estos litimos desaparecen en

su qr4n eayoria con la oromulqacidn de la Ley de Emergencia Economi-

ca.

Es necosarfo aclarar concepos y metodos de calculo. y rectiflcar

montos en dlstintor rubros. en especial: Compre Argentino (SSO

USS/alo). y repaqo de inversiones per el qasoducto NEUSA II

(450 N U$S/alo). 0os que reopresentan cosI la m1tad dot total

de subsidios estimados.

Deberia hacerse un analisis de los subsidios quo ban sido el1^1na-

dos y de la recaudaclon neta resultante. Este aspectn es de

- 166 -

sUMa imoortancla qore analitar *1 regimen de tStuest@s suqerido

on el Estud10.

Por otra parte. se requlere una re vsIIn mI nucioqa do cada

uno de estos subsId0os. Cuando las regala&s Son Paqadaq por

el orodt,ctor (YPF. y no par el Tesoro Nacional). estas no constltuyen

necesartamente un subsIdto en el caso en que esten vinculadas

a valores superiores a) costo eonomico. En teoria. las provincias

en csto caso estarian aproplandose de uns parte de la renta petrole-

ra. En los casOS en quse esta no oxista sl podrIa tratarse de

un subsidi o aunqup deherIa realizarse un caIculo mJs afinadn

va quO las rentas dffioren sequn los yacimientos. poros. Ptc..

so trate de petroleo o de gas.

So comparte en qpnpral el criterin sostenido por el Estudio.

de fij*r alqun tipo de Impuesto sobre la renta de los productores

de petrdleo v qas nat.eral. aunque naturalmente este tipo de iniciati-

vas estiAn subordinadas necosarianente al diseflo de la politico

imoositiva. cuya definicion es resorte del Congreso Nacional. asi

como la implementacion corresponde al Rhnisterlo de Economia. En

todo caso. este impuesto. que debord varIar de un afo a otr o

tendria la vpntaja de ser un tribiato de base amplia. y su aplicAcion

deb.ria acompaflsr la politics de privatizactones.

6. 3istorsiones financieras en el subsector hidrocarburos

El enfoque que e' EstudIo do a este punto merece oIqunas objecio-

nes. en tanto el s.ctor hidrocarbuiros se he resarcIdo de fnuchas

de las distorsionos enistentes. y estas han afectado. por el cont r-

rio* 4l resto de la economia.

As1 el tesoro N4acIonal ha comoensado a YPF por los orecios

do los contratos do potroleo y qas natiral. por las mavores roqolias.

por la compra de op trnlo a antiquos concesionarlos. por la compr4

de retrdleo y prodoactos loortados. etc. (Psta lists no es eubausti-

- 167 -

v.I. Por lo tint,. estos no han incidido en los costos de YPF.

En eI c4so de los 1insumOs Petroq'jImfCOS. el Tesoro Naclonal

subsid$4 tambien a los proveedores por la vent& de Insumos, con

oreclos superi0res a su costo de oportunidad. Esto ha resultado

en an beneficio para el sector hidrocarburos, COntrariamente a

lo que suroe del cuadro adjunto al Anewo F del Capitula Ill.

tamooco carresponde IncluIr. los 450 millones como obliqaci6n

financiera por la constrteccton del qasoducto NEUBA II. tal como

fue discutido en )As ultimas reuniones mantenidas con el Banco.

7. Reforma del sistems tributario vinculado a los h1drocarburos

Se ha modIfIcado rpcIentemente Ia forma de cklcul ode las reqalias

Petroleras a las orovincias y la alicuota del 1mpuesto al procesa-

miento del crudo con destino a fondos de astgnacion espectflca.

Actualmente oI Conqreso NA.cIonal esta trastando u na reforma Imn o-

s1tIva que tIende a Ia slmplificaclon del sistema tributarfo.

PEn esta reforma so enmarca la modificaci6n de los qravamenes qu.o

recaen sobre los hidrocarburos.

Las modificaciones en el r4gimen de tributos son:

I) ReqalIas.

Segun la Ley N' 23696 se cambIa la base de cAlculn dp lis

reqaleas a percibir per las provincias. En lugar de valoros

de referencda f1jados par la SE se tomara el prec1o 1nternacional

de una canasta d e petroleos. sobre el que se apI-car,& tona

aticuota del 121.

Asimismo. las orovincias podran noptar por el paqo en petrdlo4

de l1bre disponibildad pudlendo comerclarlo en el mercado intor-

no a externo.

- 168 -

f1) IMPuOSto al procesamiento de petroleo crudo.

Iste elpuesto esta dostinado a Ia r.ecsadacion de fondos

designaci6n especIflca. Pot Oe e o 0' 1055/49 fuao Ca8I.d a

la alIfCota del I01 al 0.2t, exceptuandose del oaano a Oas

casos de Imoortacidn temporaria.

4111 ImPuestons 4 con4u4O vt v Ialor aqreoado.

La propue ta d reforoa imPositiva eevada al Conqraso :nclu-

ye los siq-ainntes asoectos referIdoP al Iector de hidrocartwu-

ros:

- sp dprtqd 14 Ley NM I597 y sus 0odif1cator1,s.

- se q.nerallza iI IVA para todos IO$ comblstibles cof

una Alicloat del 131.

- se cr.o uan impaissto Interno at consume de combustibles

lfquidos q'se r.emplata a los anterlores. y cuyas alfcujotas

son:

4afta comun 60n

iafta esoecil fi5s

Kerosene I9I

Gas-oil 391

Oiesel-oil 291

Fuel-nil l8t

Sniventes 2(1

L3 base isponible prin la aoplcacldn de este impuesto Ps &I ,orcin

de wenta. descontado el IVA.

Asimismo se prooo.-e una modiflcacldn en la distribuciln de aste

Impuesto con la situisente estructura: El 301 de la recaudattdn

se distribuiria qng par el Fondo Financiero del Slstoma Nar1nni1

Provisional f el I11 pore la iunicloalidad de 14 Ciu4ad dq 94oni%

AIres V las Pnivinclas sequn el nimero de Cajas de Prevls I

Social.

tin 54% de la reciunacl6n se prnpone sea distribuldo 671 con dest:nf

a un Fondo Miactonal de lnfraestruCturs (admini'Atrado por el '4f'

y SP). p del 331 ret ante el 401 pare conformar u n Fo od Provinci c

- 169 -

de Caminos. y el Go% para un Fondo Provincial de Infraostructurs.

Finalmntf, .1 1 6t remanente de Ia recaudaci6n So Propone sea

coparticlPado entre la Raci4n y las Provincias. de acuerdo con

el r4qfmen establecido oar la iey N* 23548 de Coparttcipacidn

Federal

Se cr a oor otra oarte un Impuesto nacIonal del 20S sobre el

precin basico de 14s aeronaftas. v del SS sabre el orecio uayorista

de los aceites lubricantes para aeronsves, con destino a un fondo

Porm4nonte de Fomento de la Aviacion Civil.

Los Subsid Is y comoensacIones quo se realIfaban con fondos

prov,nientes del Impuesto a los combustibles quedaron derogados

con la sancidn de la toy de Emerqencia Econ6mica. Una ve: sancionada

la Ley de Reforma Tributaria caducarJ toda forma de subs1dio.

FinAlmente. cabe sanlalar que una norma admfnistrativa exlm10

a YPF del paqo del Impuesto a 1as ganancias a partIr del a8An

191q. situaci6n que se revierto a partir del proyecto de Reforma

Tributaria .

R. Reserv4s de qas natural

La SE consIdera que contInuan sIendo validos los comentarins

ya realisados en base al Informe 2-Reservas, del Estud0o Prelimmnar

del Baneo. Dichos comentarios est6n contenidos en la respuesta

enviada por la SE al Ranco el 4/5/R9 (Ver Anexo).

Adlctonalmente. v an d1soosicidn de datbs actualizados a fine,

de 19908 es convenlonte resaltar que en tanto en el Estudlo s.4

estIma el voliumen mInImo de reservas comprobadas en 504.600 i"4.

m del anAlIsIs de las reservas comprobadas informadas oor rPF

oficialmente al 3l-1lnR. se desprende lo siquiente:

- 170 -

3qas disuelto 60.294,4 m" m

qas libre 199.713.5 MN M3qa$ Condensado 5133004 t M m

TOTAL 173.012,6

Adn asum indo q'e el qas dIstoIlto no sea captodo las rosr vas

mrniumas disponibles son del orden de los 713.000 NZM a3

Por otra oart", y contradiciendo lo menc0onado enel EstudIo.

durante IqRB se incorporaron 87.55 MN m de qas libre *y

14.785.3 MM m de gas disuelto l0 cual hace un total de

102.320 MM n, I

Esto impilica que en caso de necesidad. como lo tue en

1988, YPF puede desarrollar nuevas roser6vs en zonas conoci-

d4s coma de alta factvbilldad de contener reservas de gas.

Estas diverqenci4s originan otras diferencias 1mportantes.

concretamentp en cuanto a la determinacidn de los costos

de exploracion. producc10n y aqotamiento. no obstante que

los concoptns empleados son los m1smos.

En el casn dJel costo de aqotaimiento Is diferencla surqe

del volutfen de reservas totales consideradas, ye que en3tanto el Estudio considera 7545 Ni1 m3 I SE toma 1.200 MM

3m

9. Costos, prec0os e impuestos del gas natural

En relacl6nal 4 n4l 'si de los costos econ6m1cos en las distint4s

etapas de la exolotaci6n del qas natural. se suqiere revisar los

comentarfos ya ofac'taados al Informe 3 del Estudlo Preliminar

presentado Por el qanco, los que se encuentran en la respluesta

la mencionada en el punto Anterior.

- 171 -

Rospecto de la polIt1co de precIos para este CoMbustible las

recoemndci@ones del Estud10 son coIncIdentes con Ia actual PolIftic

do la St, Ia cua4 procure alcanzar mayores precies Al productor,

aplicando un criterio de valor net-back.

No obstante. caben algunas consideraciones resoecto de lAs pro-

puestas presentadas en el Estudio. Los pesos a aflicar do acuDrdn

al Estud1o serfan:

I) unificar y eliminar impuestos &I consumidor

I1) aumentar los DrecIos a consuuidores donmitIcos y a usinas

(las tearIfs a Industrias, se encuentran por encime del

precio del fuel oll)

1I i aplIcar impuestes a la renta y a beneficios eventuales

(windfall profit)

Ei npcesario real-zar aiqunos comentarics en torne a estos puntos:

I) El criterio adoptado, en el caso del consumo final coloca aI

proveedor en s1tuacidn monopodlice.

i) Flijar precios de qas en funci1n del combustible que dpsolaza.

no conduce necesariemente a pr0cios econdmicos para .I oro-

ductor sl no se conoce la dewanda. Por Io tanto. Ps

necosario estudiar la demanda domdstica (elasticidad-orecie.

elasticidad-inqreso, elisticidades cruzadas) pare f11ar so-

bre bases mds ciertas Ia politica tarifaria. Por ejemplo.

deberfan oerfoccionerse los criter10s de tarificeci6n dife-

renc1ando tarifas verano-invterno. usuarlos con o sin Inte.

rruPoldn. etc.

I1I) ne acuordo con el estudio de costes elabnrado por la SE.

el ausento de procios al productor pormitirla obtener Inore-

*os de Ia evontual &pilcecI6n del impuesto a la renta.

O todas form*s, se requiere contar con inforeacidn adic10-

- 172 -

naI. sobre in qeesos netos de los productorel en otros Iuqares

del mundo (deducIdos s mpuestos), tenlendo en cuents que

en Argentina este tipo de lmpuesto no se 4plica.

iv) Los precios actiales del qas a contratistas, on un incentivo

a la Produccidn. contrartamente a lo quo su9qiere 1 EStud1o

(precios paqados vs. costos).

- 173 -

ill. SUSSECTOR ELECTRICO: CONENtARIOS A LAS *ISSuVACIOES OILE"T'gOs

1. Proveccidn de la demanda de enorjta _olctrfca

En el informe se describe la metodolozfa de proyocci6a de

la demanda el6ctr1caa So sug1ere una revisidn motedolOgica aofectos de que las proyeccones sean mis rigurosas. Este criterio.

en el sentido de quo la metodologla es perfectible, es compartido

por la SC y a este efeeto so destinan eonstantes esfuorios en

el entendimiento de quo una eorrecta planificacid del sector

olectrice y enerq#tico on general debe necesariaeento basarso en

unsa correcta estimacids de la demanda futura.

La motodoloqia utilizada on las proyeec10ies de demanda del

Plan Energ4tico Nac1enal resulto adecuada a la calidad de Ia

inforwaci1n disponible y los apartaeiontos entre las tendenclas

proyectadas y la realidad resultaron aceptables. Las mejoras

metodol6gicas deberfan apuntar a: a) Ia realizacidn de estud1os

por sector de consume a nivel regional, para ovitar que las variables

utilliadas -esulten promodios para todo el pafs y podor incorporarlas distintas realidades regionales como es el caso de los precios

diferenciales de la energfa y log consumos especificos por usuario;

b) fcorporar a nIvel nacienal modelos quo ya se utiIizan en

ol pai af sivel regional; c) tender hacia uns metodoloqia de

tipo analitico y no fundamentada sdlo en modelos macroeconomicos.

Abora blen. por sobre las apreciaciones metodologicas se sugiere

adoptar un esconario de crecimiento de la demanda con tasas anuales

inferiores a las defin1das per la SE. Oe esto se derivan dos

objeciones: la prfmera, admitida en el informo, es quo se utiliza

la msime metodoloqfa quo se cuestiona y A sequnda, quo el crecimien-

to supuesto para el P0I en el perfodo 1989-2000 es de 21 por

aflo. Esta taos de crecimiento sbria .l risultado de una Argentina

que no logre superar las restriccines econduicas viqentes. El

- 174 -

esfuerio que so esta realizando en el ajuste de les variables

economicas es de tal magnitud que pasado el Pertodo de relativo

estanCaMionto el crecimiento econdmico deber1a tener un mayor dina-

mismo. Por otra parte, si se planificara desde ya la expansi6n

de la oferta el ctr1ca para una economfa sIn crecimiento. las

oventuales restricciones al suministro enerqetico se convertirfan

en factores autonomos de estancamionto econ6mico.

2. Planificacion de las inversiones

En este punto. al Igual que en los aspectos de estimaciones

de demandas la SE permanentemente revisa las metodologfas y Parimie-

trns utilliados en la planificacidn de la expansi6n del sector

el Ic tri co.

Al respecto puede sefalarse la inclusi1n en el modelo de press-

lecci1n de equipamiento, de un conjunto de restricciones vinculado

al abastec1i. ento del sistema en condiciones hidrolOqicas eriticas.

Ello permite, por un lado contemplar las variac;ones que pudie-

ran producirse en la oferta de energfa de las centrales hidroelectr1-

cas. existentes y posIbles de ser seleccionadas en el proqrana

de obras. cuiando se produce una condicidn hidrologica critic&.

Tambf#n posibi lita. y asi es utilizado, el tratamiento de condi-

ciones operativas mediss y maximas de-las centrales termicas.

En particular en los recientes andlisis se adoptO un funciona-

miento med1 de los equipos turbovapor equivalente a 5500 Hs/aefo

a plena capacidad duranto los primeros 25 ahos de operacion.

que dfsminuye linealmente hasta un mfnimo de 4000 His. al fIn

de la vida dtil (35 aRos).

Con las restricciones de sbastecimiento en condiclones crftices

la utilizaci1n mdxima adoptada se incrementa en un I05 con I

cual se lleqa a 60s5 Us/aRo en el primer tramo.

- 175 -

AdIcIonalmente. se ha desarrollado un modelo que perm1te analizar

Ia conflabilidad del abastecimiento simulando )a operaci1n, contem-

plando en forma simultenea las variaciones de la oferta hidroel#c-

trics y la disponibilidad de los equipos tdrmicos.

En cuanto a la sugerida revisi6n de los criterios de seguridad

en el suministro elIctrIco. se detectaron problemas en cuanto

a la confiabilidad de la 1nformaciOn y no al tratamiento que

de esa informacidn se realiza en la SE.

Se espera mejorar sensiblemente la operatividad del 4rea de

planeamiento utilizando fondos provenientes de un prestamo del

BIRF en la adquisicion de equipamiento adecuado y en la contrataci6n

de estudlos de consultorla en algunos temes esoecficos.

La elecc10n de proyectos que se hIzo en el pasad, cuando

no respondio a riqurosos criterlos econdmicos se debi a la necesidad

de satisfacer objetIvos no estrictamente sectoriales. tal es

el caso de las obras de generaci6n nucleoeldctricas implementadas.

No se comparte el criterio de que los problemas financieros

del sector se expliquen por la preponderancia de las obris hidroeldc-

tricas por sobre las termicas. En todo caso. habrS que asignarle

iun mayor peso a los niveles tarifarios en el desbalance financiero.

En cuanto a las 1nversiones a realizar hay decision tomada

en el sentido de que se deben couipletar los emprendimient3s en

construcci1n: Yacyreti, Piedra del Aguila. Piedrabuena y Atucha

Para les futuras 1ncorporaciones de plantas de generacion se

discuten dos cuestiones bSsfcas: tipos de equipamiento de qeners-

cin electrica (hidraulica, tdrmica de vapor o de ciclo combinado)

y feche de puesta en servicio con su correspondiente calendario

de 1nversiones. Dada la magnitud de las obras en curso. estas

decIs0ones pueden posponerse por un aeoa lapso durante el cual

es 'actIble revisar en detalle los parametros uttliz dos en le

- 176 -

Planificaci6n. comprendlendo Ia profundizaci6n del analisis de

las cond1c1ones de operacl6n del parque termoel#ctrico existente

y las Posibtltd.des de su rehabilttacl6n. Otro factor Importante

a revisar es el precio que se asignara al gas natural para generaclon

elctrica, a a luz de la controversia respecto de las reservas

cnmprobadas de gas.

Respecto de los comentarlos sobre el Plan de ERpansion del

Sector vale la oena recalcar, en primer tdrmino. que la planiflcaci6n

se acepta como un proceso dtnAmIco que debe ir adecuandose a

las modificactones que se van produciendo en el sistema.

En vIrtud de ello el programa de obras indica la tendencia

coeicebtda par& resolver situaciones espectffcas. El segu1miento

de la evoluci6n de la demanda de enerqta y su permanente modificaci6n

Je tendenc1as es un elemento esencial con el cual se va ajustando

eo programa de abastecimiento.

No podria conceb1rse un cronograma de obras estdtico no adecuado

pare responder a modificaciones importantes en la tendlencia de

crecimiento de la demanda.

En vIrtud de lo expresado. no parece aproPlado comparar las

inversiones de dos planes de expansion de larqo plazo diagramedos

parA satisfacer oroyecciones de demanda tan diferentes. mencionando

las reducciones que se podrian realizar.

Esto es sun mSs valido considerando que en el proqrama basico

de o SE (de dic1embre de 1981. realizado con objeto de su presenta-

c1an a) Banco, y contra el cua1 se hace la comparaciOn). los

proyectos considerados tendrfan sus primeras 1nversiones con poste-

riorIdad al allo 1993. Exceptuando las obras en construccidn,

solo tres proyectos tendrfan inverslones en el alo 1990, dos de

ellos correspondientes a la lnstalac16n de dos centrales tdrmicas

de 320 Mv entrando en servicto en 1993 vlnculadas al atraso de

la puesta en servic0o de Yacyret5. pues en esa alternativa se

hab1a considerado el inic1o de la operaci6n en 1994.

- 177 -

En cuanto a posponer inversiones en transm1slon, se evaluar4

la medida en que se podra ver afectada la conflabilidad del sistema.

En func10n de eventuales modificaciones en el plan de equipamiento

en lo concerniente a tipos de generacidn y su ubicaci1n qeogrifica

se evaluarSn las distintaS alternativas de sistemas de transmisidn.

En caso de seleccionarse equipamiento t4ruico ubicado en las cerca-

nias de los centros de alto consumo el6ctrico debe pensarse necesa-

riamente en el refuerzo de la red de gasoductos.

En la rev1sI6n del plan de equlpamiento se tendr4 oresente

que una estimacion en exceso de la demanda determinarta un sobreequi-

pamiento con sus inherentes requerimientos de financiamiento. res-

tando recursos de obras necesarias en otros sectores; pero una

oferta electrica insuficiente implica barreras al crecimiento econ6-

mico y acarrea alt1simos costos, como quedd en evidencia en la

iiltima crisis electrica con la consecuente restriccion en el sum1-

ni stro.

La consideraci6n de alternativas de generacidn t4rmtca de ciclo

combinado se supeditari al anallsis que se realice de las nuevas

tecnologlas dado que la escasa experiencia arqentina en la materia

no ha sido satisfactoria.

3. Utllizaci6n de carb6n para generacton electrica

La disponibilidad de carbon es incierta dado que actualmente

se analizan alternativas para definir el desarrollo futeuro de

Yacimientos Carbon1feros Fiscales. Se aquardan estas definiciones

a corto plazo para contar con previsiones realistas en cuanto

a cantidades disponibles. costos de producci1n y precios de este

combustible. Un problema adicIonal que se tiene en cuenta es

el efecto de quemar carbon en el medio ambiente.

- 178 -

4. Plantas deogeneracidn nucleoelectr1.cs

Sl blen es cIerto que en un plan de expansIOn de mfnimo costo

no serIan seleccionedaS nuevas Pnantas nucleareS. podrIa darse

el caso de incorporaciones de centrales de este tipo en base

* a decislones exOqenas al sector enerq4tico. De todos modos.

no se afectaran las finanzas del sector ya que los prectos con

* que se remunera la generecidn nucleoeldctrica no superan a 0os

de las otras fuentes y en la eventualtdad de encarar nuevas obras.

Ios fondos necesariamente deberin provetir de fuentes externas

al sector.

5. Part!ctpaciAn_del sector 2 rivado

La participaci6n do capitales privados en el sector el4ctrico

es un tema de analis1s par parte del Gobierno. Evidentemente

se requieren modificaciones al marco legal. Para que la apertura

a Inversores privados sea factible debe ajustarse el funci1nam1ento

de las empresas nac1onales de modo de eximlrlas de cumplir objetivos

no especificos de la prestacidn del servIc0o. Tal el caso de

regqmpnes de empleo. estructuras tarifarias que contemplan subst-

d1is. intercambto de energia y pol1ttcas de generaclon no stiempre

acnrdes a criterlos economicos racionales. etc.

En cuanto a la invers1dn privada on plantas de qenerac 4 6n

t#rmIca alimentadas a gas natural. la SE ha decIdido avantar

ripidamente en el tema. aunque sin perder de vista las controversias

respecto do las reservas disponibles de este combustible y su

costo econ6mico y financ1ero. En este sentido. ya ha sido remitido

al 10 y SP urn proyecto de plieqo para lIcItar la cons,.rucci6n

y explotaci6n de centrales termicas de cIclo combinado de 300

"W. La concesi6n se otorgar! per un pertodo de 20 aeos.

Otra area donde s fes altamente factible Incrementar la particI-

pacion del sector privado es la distribuci6n. Particularmente

hay una larga experiencia de cooperativas locales que operan efi-

clentemente sistemas de pequeoa y 'ediana envergadura.

- 179 -

F1nalmente, se encuentra en estud'o aa rIvatIzaclon de los

procesos do gest0on adminlstratlva y cobran2a de los servicias

prestados por SEG8A, comprendiendo Ia lectura de medIdores, factura-

ci0n, d1stribuci1n. cobranza y Control.

6. La crisis el4ctrica

Var10s factores adversos coincidieron e Impidieron un normal

su,ministro electrico: los bajos aportes hidricos tanto en la

cuenea del Rfo Limay como en la del Uruguay. la salida de servicin

de la Central Nuclear Atucha y el mal estado general del Parqup

de generacidn t4rmica.

La SE s1iue de cerca la e volucion de la demanda elIctrIca

y toma los recaudos necesarlos para asegurar la provIs1in do

combistibles con destino a qeneracidn electrica a fin de minimizar

In% efectos de la crisis.

r. Aspectos financieros del sector el#ctrico

E1 plan de rehabilitaci8n financiers del sector electrica se

yia seriamente comprometido rn su desarrollo pot los efecto!. do

I cricis enerqetica y econ6mica. A Ia caida en los inqrpsos

r 'sultante de las restricciones en la oferta se sumaron las mayorec

erogaciones en mano de obra y materiales destinados a pa liar

la emergencia. Coincidentemente se verifico un retraso tarifarin

duranto el ago 1988 y el primer semestre de 1989 como parte do

la politica artiinflacionaria global. Asimismo. aumentaron los

saldos de deoud impaqos por suministro electrico a entes publicos

y orivados.

Desde la asunci6n del nuevo qobierno en juIio de 1989 se

puso en marcha un severo plan de ajuste econ6mico. Las principaies

acc1ones adoptadas en el subsector electrIco se refieren a los

siquilntes aspectos:

- 180 -

I) Tarifas

Se produjo una drdstica recompos1clon tarifarta tendiente a

asequrar el cubrimiento de los costos operativOs de las empresas.

Se practicaron ajustes nominales que no registran antecedentes

en el pafs. como ya se detall6 en el punto 2.4.

Los 1ncrementos tarifarios fueron practicados con la premIsa

dp permitir a las empresas afrontar la crftica situacion financiera

de co-to plazo.

La futura politica tarifaria estarl ligada al reordenam1ento

instituc1onal del sector. En est- sentido el criteria es que

las tarifas deberAn quardar correspondenc1a con los costos de

operac10n y mantenimiento. Ios costos de reposici6n de activos

asf como permitir una financiac1on parcial de los costos de expans1dn

del sistema. Se debe seflalar que se ha producido urn mportante

de.arrollo instrumental en cuanto a tarifas a travds de estudics

quo se estdn realizando.

i) mpuestos

La revisIon del sistema Impositivo del sector se darS en el

marco dp la reforma tributaria qlohal que ha encarado el qobierno.

i i ) Cuentas_por_Cobrar

Se encuentra en elaboracion un rdgqmen de compensaci1n de deudas

entre organismos del sector publico al 30/6/89 que mejorare los

perfiles de saldos impagos. Se incluirS en este regimen a entidades

provinciales y municipales.

iv)Subsidlos

Se encuentra en revisI6n el conjunto de subsid1os y tarifas

especiales otorgados par A y EE. SEG6A e HIORONOR. Se establecerd

en cada caso si corresponde el otorgamiento excepcional a Su

elimfnacion.

- 181 -

v) Fondos EspecificoS

So flex1ibi1zard el manejo de los fondos de asI9naci6n especIfIca

con Ia conformaci6n de un Fondo Jnico transitorio administrado

por el MOSP. Parte de estos recursos se desafectarin temporariamente

pasando a integrar los ingresos de Tesorerta.

8. Conclus10n

El enfoque que se dio al andlis1s es estrictamente subsectorial.

So Plerde de vista que un sector el6ctrtco eficiente es un factor

do viabilidad del desarrollo y no un fin en sf mismo.

Se esta proponfendo para el corto plaza un subsector financiera-

mente autosufIcIente. Para ello es necesarlo revertir profundas

distorsiones do larqa data. Un problema qrave es que para loqrar

incrementos reales en las tarifas se deben ajustar permanentemente

las tarifas nominales dado qua: los demas prec1os de la economfa

se ajustan casi Inmediatamente. As. el intento de recomposici6n

tarifaria se convierte en un factor autonomo de inflaci6n. De

t todos modos el esfuerzo de recomposiciOn tarIfarla producido en

el mes de julia mejora notablemente la situaci6n de caja.

Con respecto a la estructura de fondos esoecificos disentimos

con la apreciaci4n de que una transferencla de fondos del sector

hidrocarburos al elIctrIco crea distorsiones en las decislonps

de inversion. La SE Psti convencida de 1 racionalidad de que

un impuesto sobre recursos no renovables financie el aprovechamiento

de recursos renovables como la hidroelectricidad en los que el

pals tiene grandes posibilidades.

Las propuestas para el medIano y larqo plazo se basan en

que una combfnacion de una proyecci6n de demanda supuestamente

mas realista y una selecc1on de obras con un fuerte componente

termoesectrico mejorarfan sustancialmente las finanzas del sector.

Esto puede acarrear dos consecuencias negativas. La primera es

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que Ia proyeccl6n de la demeanda con tasas de crecim4ento mds

bajas podrfa cooductr a. una situaci6n de Insuficlencia de equipa-

miento do qoneraclon con la$ consocuentes folenclas en el abastec1-

miento ante un altamente Probable crectmoento economieo sostenido.

Una posible resultante de seleccionar equipamiento t4rmtco en lugar

de hidroeldetrico. *i b1en el esfuerto de inversion fnicial es

iustancialmente menor. es conducir a una situaci6n de insuricienc1a

en eI abastecolmento de hidrocarburos a otros sectores de Ia

econonfa. como se 1ndica en otros capitulos que 1ntegran el prop1o

informe del SIRF. En todo caso, serf& transferir los Inconvenientes

al 'uturo. Per lo tanto. estas atternativas servn cuidadosamente

cvaluadas.

I'

report no. 7993-ar argentina energy sector...

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