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Argentina importing fuel to meet shortages

April 16, 2013 at 12:57 PM   |   Comments

BUENOS AIRES, April 16 (UPI) -- Argentina is importing fuel to cope with shortages after fire damage to a state-run refinery in La Plata, 35 miles southeast of Buenos Aires, officials said.

Partial production began last weekend but it could be at least another month before the refinery resumes full production, about 190,000 barrels a day. The refinery, operated by nationalized YPF S.A., is the largest in the country.

Argentina seized majority Spanish share in YPF last year, arguing it could run the company more profitably than Spanish owner Repsol. But critics say rising imports will likely do away with any savings the government hoped to achieve and start eating into YPF profits.

YPF is also having difficulty raising finance for its ambitious development plans because of Argentina's poor credit in financial markets.

Argentina's gasoline demand rose almost 8 percent last year but political reasons have prevented President Cristina Fernandez de Kirchner from raising prices to contain demand.

More than one-third of fuel consumed in Argentina was produced at the La Plata refinery before a fire earlier in April, blamed on flooding. The blaze caused widespread damage to the refinery's installations.

Officials say large investments will be needed to refurbish the damaged plant and put production back to normal.

A shortfall in the refinery output would likely continue through most of the year. Projections before the fire indicated YPF hoped to raise output by at least 4 percent.

YPF may have to increase imports from 10 to 15 or 16 percent to meet domestic demands, Chief Executive Officer Miguel Galuccio said.

He said the fire caused by flooding at the plant affected "nearly the entirety" of the refinery installations.

Officials have yet to release precise figures for the cost of repairs and increased fuel imports, said to be in excess of $2 billion a year.

Galuccio discounted speculation that YPF would raise prices to meet some of the cash shortfall caused by the fire.

A fuel price rise will be political sensitive for Fernandez. The president recently brokered a consumer price freeze at the country's main supermarket chains amid reports annual inflation exceeded 24 percent.

Independent economic analysts are barred from offering alternative statistics for key economic indicators and have been warned they face hefty fines for ignoring the directive.

The price freezes agreed by supermarkets will still not cover increases in prices of fresh produce as well as costs related to education, school clothing and stationery for school-goers.

An academic survey from Torcuato Di Tella University warned Argentina faced inflationary spiral of up to 30 percent over the next 12 months.

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