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Apache:Gets Approval For 2nd 'Gas Plus' Contract In Argentina

BUENOS AIRES -(Dow Jones)- Apache Corporation (APA) has gotten approval again to sell natural gas at higher-than-normal rates under the Argentine government's "gas plus" program, the company said Monday.

Under the plan, Apache will start selling 10 million cubic feet per day of natural gas to Cammessa, Argentina's wholesale power-market regulator.

Starting in January, Apache will sell the gas for $4.10 per million British thermal units for one year.

The approval is Apache's second under Argentina's Gas Plus program, which aims to give companies a financial incentive to explore for gas by allowing them to charge higher rates for gas from new discoveries.

"These Gas Plus projects are yet another sign of Apache's commitment to invest to meet Argentina's future energy needs," said Jon Graham, vice president of Apache's Argentina Region. "These substantial investments represent a milestone in the exploration and development of gas reserves in non-conventional fields at competitive prices."

The gas will come from the Guanaco and Ranquil-Co fields in Neuquen province, Apache said.

Apache recently got approval to sell 50 million cubic feet per day of gas from two fields in the provinces of Neuquen and Rio Negro. That gas will sell for $5 per million BTU beginning in 2011.

That's about double what Apache and other companies have been getting per million BTU for other projects. Some gas producers have been receiving an average of $2 a million BTU, far below the average market price in many countries.

That's also far below the roughly $6Argentina pays to import natural gas from Bolivia or what it pays to import liquefied natural gas from Trinidad and Tobago.

So far, Apache is the only company with Gas Plus projects approved for gas marketing, Apache said, noting that it has three more projects in line for approval.

In the third quarter, Apache produced 184 million cubic meters of gas per day in Argentina at an average price of $1.89 per thousand cubic feet, the company said.

That included sales to regulated residential and power-generation markets and deregulated industrial markets.

Argentina's gas industry has long faced unfriendly prices and unpredictable tax policies that discourage investment. Since Argentina devalued its currency in early 2002 and froze utility rates, companies here have voiced concern about severely reduced returns on their investments.

That concern intensified in recent years as inflation raised operating costs while soaring demand outpaced the supply of oil and gas, repeatedly putting Argentina on the edge of a minor energy crisis.

Amid the higher demand, the government has sometimes rationed energy, and power outages have affected tens of thousands of homes during extreme temperatures.

Meanwhile, rising demand for gas has met with a diminishing supply, forcing the government to import costly LNG during the cold winter months of May through August.

This year concern about supplies led the government to extend the LNG contract until next winter.

-Taos Turner, Dow Jones Newswires; 5411-4103-6728; taos.turner@dowjones.com

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  11-09-091401ET
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