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Financial Times: September 3: ExxonMobil seeking Argentina exit?

Edited by Jonathan Wheatley, Brazil Correspondent
Published: September 3 2007 02:43 | Last updated: September 3 2007 02:43
Jude Webber

The signs of serious trouble ahead in Argentina’s energy sector are becoming impossible to ignore – unless, apparently, you are in government.

The latest commotion concerns reports that ExxonMobil, the world’s biggest oil company, is seeking to sell its assets and exit the country. Esso Petrolera Argentina, an ExxonMobil unit, declined to comment on talk that JP MorganChase was offering its Campana refinery and 590 petrol stations for $200m – described by one energy M&A specialist as ”a lousy price”. Esso has 12 per cent of Argentine fuel sales.

But Rosario Sica, president of a petrol station operators’ association, said a senior Esso official had told her: “We are in these talks”, citing legal instability and the difficulty of turning a profit.

It is easy to see the official’s point. Foreign oil companies operating in Argentina are increasingly wearying of President Nestor Kirchner’s policy of keeping local fuel and energy prices artificially low, forcing them to import diesel at a loss to plug supply shortfalls. Royal Dutch/Shell says it is toughing it out for now, in spite of hefty fines and a lawsuit in which the government wants its boss jailed for allegedly undersupplying the market – something it denies.

Argentina needs an efficient energy sector to keep farming booming, so Esso’s threatened exit (after a century in the country) should be a loud wake-up call for Kirchner’s wife, Cristina Fernandez, expected to step into his shoes after elections next month.

Prominent local businessmen and Enarsa, a state energy company with no real operations, are being touted as possible buyers. If Mr Kirchner’s policies are to apply to them, too, they will need deep pockets.

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