MercoPress. South Atlantic News Agency

Petrobras backs from criticism of Argentina's energy policy

The Argentine government rejected this week calls from the head of Brazil's government owned oil company, Petrobras, for changes in energy pricing in Argentina, where gasoline and diesel prices have been virtually frozen for more than four years.

Petrobras CEO José Sergio Gabrielli, speaking during an investment meeting in Rio de Janeiro on Tuesday, said Argentina's price scheme was hampering investment in the sector. Argentina's Federal Planning Minister Julio De Vido said Gabrielli's remarks were "totally inappropriate." "Under no circumstance are we going to allow the president of a company, in this case a state-owned Brazilian company, to give an opinion about the sovereign politics of the Argentine state" he emphasized. However late Wednesday Petrobras Argentina is a press release said the company's CEO words had been "misinterpreted" by the press. Petrol and diesel prices in Argentina have been practically frozen under a tacit agreement between oil companies and the government reached during the country's 2001-2002 meltdown of the economy. The aim was to help tamp down inflation, which last year was edging two digits. "We believe that the price system in Argentina is not a system that could stimulate much investment in the sector" Gabrielli was quoted. "We believe that there is a need for some changes in the sector, especially in the area of derivatives and also natural gas so that they can convey more adequately signals of relative scarcity of these products" he added. Petrobras CEO's was also concerned with declining oil and natural gas reserves in Argentina, which called for additional investment. Energy analysts say there is a shortage of gas and electricity in Argentina as supplies has not increased as much as the robust economic growth of the past few years. Proven reserves are estimated to be falling at an annual rate of three years because of insufficient exploration and production. Most of Petrobras' foreign output comes from Argentina, where it is actively working after acquiring local company Perez Companc in 2003, now Petrobras Energia. "We would not go to Brazil and suggest that (President Luis Inácio da Silva) Lula adopts a specific price policy, De Vido said, adding that Petrobras "has a duty to invest without any prior conditions". De Vido also said that the Argentine government will be asking Brazil for a formal explanation. De Vido also said Petrobras's oil and gas fields in Argentina have "huge potential." In a press release by the company late Wednesday Petrobras said that it is fully committed to its investments in Argentina while at the same time blaming local media for misinterpreting Gabrielli's words. "At no time did Gabrielli indicate that the company was considering a reduction in its investments or considering not meeting its commitments" indicated the release. Petrobras added that the company employs 14.000 people in Argentina and has committed additional investments in the country up to 2011 of 2.3 billion US dollars.