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Argentina to Almost Triple Gas Purchase Price to Boost Drilling

Argentina will almost triple natural gas prices to producers to encourage conventional and shale drilling and stem declining output, according to a subsidy plan published in the official gazette.

The government will pay producers $7.50 per million British thermal units, the government said today in a resolution signed by deputy Economy Minister Axel Kicillof and Domestic Trade secretary Guillermo Moreno. The average price paid to producers in 2011 was $2.50 per million Btu, gas-producing province Neuquen’s governor, Jorge Sapag, said in an e-mailed response to questions in September.

President Cristina Fernandez de Kirchner nationalized energy producer YPF SA in April seeking to stop declining output and boost production. YPF’s gas production slid 2.3 percent in 2012 compared with the prior year, Chief Executive Officer Miguel Galuccio said yesterday in a speech from Chubut province. YPF’s gas production dropped 11 percent in 2011 when the Buenos Aires-based company was controlled by Spain’s Repsol SA.

“Natural gas reserves are declining as a consequence of low investments in exploration and exploitation,” the government said in plan published today.

A unit of Total SA is the country’s largest gas producer with a 30.45 percent market share, YPF has 22.97 percent, BP Plc’s Pan American Energy LLC has 12.05 percent, Petrobras Argentina SA has 8.92 percent and an Apache Corp. unit has 3.9 percent, according to data published on the Argentine Institute of Oil and Gas’s website.

The price increase would also benefit gas transporters Transportadora de Gas del Sur SA and Transportadora de Gas del Norte SA because producers will be paid the higher price for gas transported through those companies’ pipelines.

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