Energy South America

This week Nestor Kirchner announced that Argentina would reactivate the Atucha II nuclear project, which has been mothballed since 1994. Argentina will enrich uranium to supply the plant. Currently 34% of Argentina's energy supply is hydroelectric, 9% nuclear from two plants, and almost all the rest from oil and gas.Due to government policies hostile to investment in oil and gas, there has been almost no development of new gas production for several years, and the government has implemented highly unpopular policies to deal with the gas shortages experienced during last winter and this, such as:

1.) Renege on gas supply contracts with Chile. This has caused major economic losses in Chile. Chile is now building LNG facilities as quickly as possible, and may or may not be a customer of Argentina in the future, depending on what kind of deals Argentina offers. Chile will be able to buy gas from any source in the world.

2.) Impose penalties on "excessive" gas consumption. If you use more gas last winter and this, than you did in a previous year, you pay fines to the gas company, greatly increasing the cost of gas. Since the cost of gas to residential consumers is subsidized to the tune of around $6.00 US per million BTU, the bureaucratic punishment, complicated in the extreme, is supposed to take the place of market forces, which in any normal country would be penalty enough. The complaint lines at the local gas office are long, the customers are hostile, or bewildered, and the employees who have to deal with them have had a belly full. Standing in line one day, I heard the little old lady explain to the old sourpuss manning the desk that her husband had been taken ill this winter, and she had to heat the house more because he was home for weeks, and she just did not have the money to pay the fine, which was a multiple of what her gas bill should have been. The response was to explain to her the Byzantine complaint process.

3.) Gas supply cuts. Gas has been repeatedly cut off to industrial plants which are big consumers, the plants idled, and the workers sent home.

4.) Brow beating the oil and gas companies. One cabinet minister famously stated that he wanted the oil companies to "turn on the wells". Good for laughs among those who actually have a clue as to how oil and gas wells work. Kirchner has stated publicly that companies should invest in gas development out of patriotism.

So now Nestor Kirchner is taking charge of a mega nuclear project, not only opening juicy new opportuinties for corruption, theft and graft, but also raising serious security fears. This week some moron from the States packed a souvenir stick of dynamite in his bag and flew to Houston, where it was found (please give him some jail time, you guys.) What would be the problem with a little uranium for a dirty bomb?

THe history of these mega projects run by the Argentine government is, as you might expect, somewhere between tragedy and black comedy. Maybe this time it will be different. Argentina certainly needs the energy.