CAPITAL: Buenos Aires

MONETARY UNIT: Peso

REFINING CAPACITY: 652,675 b/cd

OIL PRODUCTION: 847,900 b/d

OIL RESERVES: 2,621,178 bbl

GAS RESERVES: 24,148 bcf

Declining oil prices crimped spending in Argentina and all other parts of Latin America as 1998 progressed.

International oil companies rated Argentina among the most favorable countries for new E&P ventures in a poll by Robertson Research International. Nevertheless, Argentina`s rig count declined from 58 rigs in late 1997 to 37 in October 1998, Baker Hughes reported.

With exploratory drilling in progress off the U.K.-ruled Falkland Islands during the year, a U.K.-Argentina territorial dispute flared up. Argentina demanded 3% royalties in the event of any discoveries.

Argentina continued to claim the Falklands (which it calls the Malvinas Islands), although the country lost a brief war with the U.K. in 1982 over the islands. U.K. officials reportedly rejected Argentina`s demands to "tax companies licensed by the rightful authorities."

Six exploration wells in the Atlantic north of the Falklands came up dry, though several had oil shows. The wells were Amerada Hess 14/9-1 Orca and 14/9-2, Lasmo 14/13-1 Minke, Shell 14/5-1A Sebald and Fitzroy-1, and International Petroleum Corp. 14/24-1 Breala. The rig was the Borgny Dolphin semisubmersible.

Upstream developments

Drilling declined in Argentina in 1998 with low oil prices. E&D expenditures resulting from privatization had led to drilling of about 1,300 wells in Argentina in 1997, approximately double the yearly totals of 5 years earlier.

During 1998 Petrolera Argentina San Jorge SA, Buenos Aires, found what it called an "important new oil accumulation" on the CNQ-27 (Rio Negro Norte) block in the Neuquen basin. Loma Negra x-1, 30 km northwest of General Roca, flowed 450 b/d of oil from Pre-Cuyo, 1,350 b/d from Las Lajas, and 2,600 b/d from Punta Rosada, at 2,500-3,200 m. It was the first commercial oil production from Pre-Cuyo in this part of the basin.

A consortium led by Total reported first oil from an extended-reach well from Tierra del Fuego to Ara West field 10 km off the coast on its Cuenca Marina Austral acreage. The well flowed 17,300 b/d of oil and reached 6,638 m measured depth and 1,795 m true vertical depth.

Processing activity

Downstream operations were also benefitting from privatization and active investment.

A Total-led consortium planned to start up a $70 million plant in 1999 to extract liquids from natural gas produced from Canadon Alfa and Ara fields off Tierra del Fuego. Capacities were to be 250,000 metric tons/year of LPG and 60,000 tons/year of natural gasoline.

LPG would be exported through a pipeline owned by Chilean state firm Empresa Nacional del Petroleo (ENAP) to a separation plant at Cabo Negro, Chile. The natural gasoline would be blended with crude from Total-operated Hidra offshore field.

Enron`s Transportadora del Gas Sur affiliate was to expand its General Cerri plant and bring on stream 300,000 metric tons of LPG during the year.

YPF, Dow Chemical, and Petrobras formeda jointventure to build the 650,000 metric ton/year MEGA projectgas plant, whichwas likelyto comeon streamby 2002with production destined for Brazil.

Plans were announced to build five other small er gas plants due on stream in 1998-2001 to add 386,000 metric tons/year of LPG for export.

Transportation

Pipeline projects were under way to transport Argentine gas to Chile, Brazil via Bolivia, and Uruguay.

Uruguay`s government picked BG plc, formerly British Gas, and the Amoco-Bridas joint venture Pan American Energy to build and operate a gas pipeline from Buenos Aires to industrial and power users in Montevideo.

Plans were advancing for a $400 million integrated natural gas project in Chile`s Bio Bio region fueled by Argentina gas. NOVA Gas International and its partners were to proceed with Gasoducto del Pacifico, a $342 million pipeline from the Neuquen basin to Chile.

Another project was a 163 km, 20 in. pipeline from Loma de la Lata, Argentina, to Concepcion, Chile. Soc. Gasoducto del Pacifico let a $47 million contract to Dragados Internacional de Pipelines SA for the construction of Spread 3 of the system.