Argentina's Government Cuts Fuel Oil Exports

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Researched by Industrial Info Resources (Sugar Land, Texas)--According to Guillermo Moreno, Argentina's Domestic Commerce Secretary, the country's government has decided to restrict crude oil, fuel oil, gasoline, diesel fuel and naphtha exports to regulate rising domestic prices until supplies normalize and prices drop to levels seen in October 2007.

The price of premium gasoline in Argentina has been $0.64 per liter until April 2007. During the last three months, petroleum companies have increased fuel prices. The government's decision to cut fuel oil exports was taken to force companies to go back to the prices in October 31, 2007, and raise supply at gas stations.

In Argentina, Repsol-YPF, Petrobras, Shell and ExxonMobil (NYSE:XOM) account for 95% of all refining and fuel sales in Argentina in the country. ExxonMobil, the world's largest oil company, plans to sell its assets in Argentina, including an 84,000-barrel-per-day refinery in Campana, as well as its chain of service stations throughout the country that include 90 directly owned by Exxon and more than 500 that are franchised. The American company controls 12% of the local fuel market. The transaction will be directed by J.P. Morgan Bank (NYSE:JPM), which is looking for possible buyers in Argentina. Esso, the international trade name for ExxonMobil, with which the company has operated in Argentina since 1911, will not be included in the commercial transaction. This will force the potential buyer to give the acquired assets (refinery and service stations) a new name. For details view related September 3, 2007, article - ExxonMobil to Leave Argentine Soil.

Since Exxon is planning to sell the Latin American assets, the government decision may undermine the attractiveness of the company's assets. Brazil's state-owned oil company is deeply interested in purchasing the Campana refinery since its acquisition would help Petrobras not only to produce lower sulphur fuel oil by 2009, as stated by the Argentinean Secretary of Energy, but also to get 35% in Argentina's fuel oil production business. For details, view related September 21, 2007, article - Petrobras Shows Interest in Buying ExxonMobil's Argentinean Assets.

Repsol YPF is having problems supplying gasoline because demand has exceeded supply. The company has the lowest prices in the market.

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