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money.cnn.com: ExxonMobil In Talks To Sell Argentina Unit For $200 Million – Report

August 30, 2007: 10:55 AM EST

BUENOS AIRES -(Dow Jones)- ExxonMobil (XOM) is in talks to sell its Argentine unit for some $200 million in a deal being brokered by J.P. Morgan, local daily Clarin reported Thursday.

According to the report, ExxonMobil plans to sell all of its Argentine assets, including 90 directly operated service stations, a 500-station franchise, a refinery, three fuel loading docks, a lubricants plant, two jet fuel stations, and gas fields in the provinces of Salta and Neuquen.

The newspaper cited an ExxonMobil spokesman as saying “we can’t confirm nor deny this information.” ExxonMobil and J.P. Morgan representatives were not immediately available for additional comment.

The news comes amid an increasingly tense fight between executives at the local unit of Royal Dutch Shell PLC (RDSA) and the government over allegations that Shell isn’t adequately meeting domestic fuel demand. The nation’s top price controller, Commerce Secretary Guillermo Moreno, has fined Shell and is now seeking jail time for local company executives.

In a radio interview Thursday, Shell Argentina President Juan Jose Aranguren said that although his company has long rejected persistent rumors over the past few years that it wants to leave the country, “we cannot now say what will happen in the future; that is something uncertain.”

As Moreno has stepped up his campaign against Shell, Aranguren has increasingly complained to local media about what he describes as ” discrimination.”

Shell says that although it only accounts for 13% of the retail fuel market, it has been subject to 64% of the 800-some inspections carried out by Moreno’s agents this year. The company also said it is exceeding supply requirements. The government is requiring retailers to increase supply by roughly 7% on the year, but Shell says it has increased supply by 11.3%.

Meanwhile, business daily Cronista reported Thursday that Argentina’s Environmental Secretary Romina Picolotti is threatening to shut down Shell’s Doc Sud refinery following an inspection last week.

Oil companies have grown increasingly impatient with government attempts to hold down pump prices that began in 2005, when Argentine President Nestor Kirchner called on Argentines to boycott Shell service stations after the company raised prices on a jump in international oil prices.

ExxonMobil followed Shell’s move, but both companies quickly dropped prices after government-aligned protesters marched on Shell stations, leading to a drop in sales. Pump prices have remained more or less under de facto government control since.

In addition to ExxonMobil and Shell, Argentina’s service stations are also supplied by Repsol YPF (REP) and Petrobras (PBR). Repsol accounts for just over the retail fuels market, with the other three companies roughly splitting up the remainder.

Repsol and Petrobras have both upstream and downstream operations in Argentina, which somewhat eases the effect of the unfavorable domestic diesel pricing scenario, while heavy oil export taxes launched in 2004 allow Shell and Exxon Mobil to buy oil at a domestic discount.

But with refineries running at maximum capacity, Moreno has demanded that companies now import diesel fuel to meet demand amid now-chronic reports of shortages during key planting and harvest periods. Company officials say that importing diesel at world prices causes them to lose money on domestic pump sales.

To some degree, oil companies have offset unfavorable domestic fuel prices by exporting excess gasoline with low export taxes. Shell’s Aranguren said this week, however, that the government has been rejecting its export requests since June.

-By Drew Benson, Dow Jones Newswires; 5411-4311-3127; [email protected] dowjones.com

  (END) Dow Jones Newswires
  08-30-07 1055ET
  Copyright (c) 2007 Dow Jones & Company, Inc.
 http://money.cnn.com/news/newsfeeds/articles/djf500/200708301055DOWJONESDJONLINE000812_FORTUNE5.htm

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