National Energy Plan

The Argentine Government announced the National Energy Plan for the 2004-2008 period . Such plan provides for investments of up to 11,149 millions of Argentine pesos for the next 5 years. The most important announcements made by the Argentine Government regarding such plan are as follows:

1. Agreement with Venezuela for the supply of fuel oil

The Argentine Secretariat of Energy established by means of Resolution No 389/2004 the possibility for the organism in charge of the dispatch in Argentina to enter into agreements with Petróleos de Venezuela S.A. (PDVESA) to import fuel oil and gas oil, within the Agreement for the Cooperation between Argentina and Venezuela signed on April 6, 2004.

2. Supply of electricity on an interruptible basis from Brazil

The government announced the call of an international public bid to establish “supply agreements” for the use of electricity from Brazil for up to 500 MW per day.

3. Program for the Rational Use of Energy

The Argentine Secretariat of Energy issued Resolution No 415/2004 approving the Program for the Rational Use of Energy to encourage residential and commercial users of natural gas and electricity to decrease or not to increase their consumption of natural gas and electricity with respect to their consumption of the year 2003 with the objective, in the case of the natural gas, of disposing of greater volumes of natural gas for its consumption in industrial activities. The Program for the Rational Use of Energy establishes (i) discounts for certain categories of users that decrease their level of consumption with respect to the year 2003, and (ii) surcharges for certain categories of users that do not decrease their consumption for the year 2003. The reference prices to which the discounts and surcharges will be valued have been established by Resolution No 416/2004 of the Argentine Secretariat of Energy. The Program for the Rational Use of Energy shall be in effect for one year as from May 2004, and could be extended by the Argentine Secretariat of Energy.

Likewise, Argentine Secretariat of Energy issued Resolution No 552/2004 that regulates the Program for the Rational Use of Energy approved by Resolution No 415/2004 which shall apply to the areas granted with concessions to Empresa Distribuidora del Norte S.A. (EDENOR), Empresa Distribuidora del Sur S.A. (EDESUR) and Empresa Distribuidora La Plata S.A. (EDELAP), all under national jurisdiction.

4. Agreement with Bolivia for the supply of natural gas

The Argentine Government entered into an agreement with the Republic of Bolivia for the supply of natural gas by Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), who will act as a gatherer and seller, of up to 4 MM m3/day of natural gas, which will be transported by the Pocitos - Campo Durán pipeline, at a price of US$ 0.89 for each million of BTU. However, whenever the calorific level of natural gas exceeds 9,200 kilocalories, the price of the excess shall be calculated regarding the cost of opportunity in Bolivia of the liquids associated. The agreement establishes that those companies who, as from the agreement, have declared their firm intention to export and import natural gas shall have a 30 day term priority as from the agreement to export natural gas prom Bolivia and import natural gas form Argentina,. After such term and in the event that those companies do not arrive to an agreement YPFB shall notify such situation to the Argentine Secretariat of Energy so that it can make a call to buy the natural gas in the conditions established in the agreement. Furthermore, such agreement established that the Argentine Government shall not authorize the export of natural gas from the Northeast Basin of volumes of gas exceeding the historic average of the previous 90 days, as long as the agreements for the supply of natural gas from the Republic of Bolivia are in effect.

5. Re-negotiation of agreements

It was set for the month of June, 2004 the negotiation of the basic terms for the final normalization of the licenses in December 2006.

6. Expansion of the natural gas transportation system

The government announced the extension for the year 2005 of the existing natural gas transportation system, in 6 MM m3/day. For the years 2006 and 2007 the government announced the construction of two new pipelines: (i) the Argentine Northeastern Pipeline (Gasoducto Noreste Argentino) with a projected route from Bolivia and the Nothwestern Basin to the Mesopotamic Region (Región Mesopotámica), that would have a projected capacity of up to 20 MM m3/day of natural gas, and (ii) the San Martin II Pipeline (Gasoducto San Martín II), which would expand the transportation capacity from the province of Tierra del Fuego to the province of Buenos Aires, and would have a projected capacity of up to 16 MM m3/day of natural gas.

7. Creation of a state owned energy company

The Argentine Government announced the creation of Energía Argentina S.A. (Enarsa), an energy company in which the state would have a controlling participation. The law creating Enarsa has not been passed by the Argentine Congress yet.

8. Agreement for the “normalization” of the price of natural gas

The Secretariat of Energy issued Resolution No 208/2004, approving the “Agreement for the Implementation of a Scheme of Normalization of the Prices of Natural Gas at the Point of Admittance to the Transportation System”. The agreement, subscribed by certain producers of natural gas and the Argentine Secretariat of Energy and in effect until December 31, 2006, establishes a scheme of increases of the price of natural gas at the point of admittance to the transportation system. Such increases would have the intention that by December, 2006 the price of natural gas shall be at market prices. Likewise the Agreement establishes a commitment by certain producers of natural gas to supply volumes of natural gas to the local market.

9. Increase of hydrocarbons exportation rights

The Ministry of Economy established an increase of the exportation rights of certain hydrocarbons, as follows: (i) Resolution No 335/2004 increases to 20% (before 5%) the exportation rights of propane, butane, liquefied petroleum gas (LPG) and other petroleum gases y other gaseous hydrocarbons as specified in the resolution, (ii) Resolution No 336/2004 establishes at 5% the exportation rights of jet fuel and other petroleum gases specified in the resolution, and (iii) Resolution No 337/2004 increases to 25% (before 20%) the exportation rights of crude oils. In accordance with the terms of such resolutions, the increase mentioned before are in effect as from May 13, 2004. Additionally, on May 27, 2004 Decree No 645/2004 was published in the Official Gazette of the Argentine Republic establishing an exportation right of 20% on exports for consumption of the following hydrocarbons: liquefied natural gas (LNG), natural gas in gaseous state and other gases in gaseous state specified in the decree.