PLANNING MINISTER DE VIDO ON ENERGY CRISIS AND

UNCLAS BUENOS AIRES 001456 SIPDIS SIPDIS SENSITIVE WHA/EPSC FOR FCORNEILLE ESC/IEC/EPC FOR MCMANUS,JIZZO USDOC FOR 4322/ITA/MAC/OLAC/PEACHER TREASURY FOR LTRAN PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE PASS USTR FOR EEISSENSTAT US SOUTHCOM FOR POLAD E.O. 12958: N/A TAGS: ECON EINV ENRG EPET EAIR BEXP AR SUBJECT: PLANNING MINISTER DE VIDO ON ENERGY CRISIS AND INFRASTRUCTURE INVESTMENT REF: (A) Buenos Aires 1436 (B) Buenos Aires 1415 (C) Buenos Aires 1068 (D) Buenos Aires 880 -------------- Summary -------------- ¶1. (SBU) Argentina will successfully weather current and future energy shortages, according to Planning Minister De Vido, via a combination of short term fixes (including imports of Brazilian electricity and GoA subsidies for the import of diesel fuel for generators),plans for a post-election national conservation program to save 1,000 MW annually, medium term plans to incorporate 1,800 MW of new state-run thermal generation capacity in 2008/9, and longer term plans to add new hydro and nuclear generation capacity to the national grid. Before this new capacity comes on line, De Vido said, there may be "risky" periods where domestic demand may not be fully met, but no "critically risky" periods that would imperil national production. The GoA has developed a (not yet public) long term "Bicentennial" national infrastructure that spans the gamut of domestic energy, road, and rail development along with regional transportation and energy integration with Argentina's Southern Cone neighbors. A final GoA decision on adopting an HDTV standard should be made soon after October elections. President Kirchner should shortly sign airport concession management legislation that will reduce operating costs for U.S. carriers. End Summary -------------- Measures to Deal with Energy Crisis -------------- ¶2. (U) In a July 23 meeting with Ambassador, Planning Minister and Presidential confidant Julio de Vido De Vido reviewed current GoA initiatives to address the nation's energy crisis, including the "Total Energy" plan (Ref B) to temporarily boost electricity imports from Brazil and to boost domestic thermo-electric generation by subsidizing, at a cost of US$300 million over three months, the use of diesel fuel by electricity generators to free up some 5.8 million cubic meters of natural gas for industry and residential heating use. ¶3. (U) De Vido also provided background on his July 19 announcement of Decree 938/2007 which provided for the tender of 7 gas and diesel electricity turbines by state-owned energy company ENARSA to provide Argentina 1,800 MW of additional power at a rough cost (according to local media) of US$ 1 billion. Tenders will be issued in early August and awards made in October for ambitious delivery dates of December 2007 through May 2008, to come on-line in 2008/9. Turbines are to be installed in five generation sites in Ensenada, Campana and Necochea, all in Buenos Aires province. Two additional turbines will be installed in Santa Fe and in Cordoba provinces. (Note: Separately, on July 20, President Kirchner and Senator Christina Kirchner announced the construction of two state-owned hydroelectric stations on the Santa Cruz river at a cost of $1.5 - 2 billion. End Note). De Vido said that Siemens has already offered to provide these seven gas and diesel turbines within an 6-11 month delivery window, versus a 30 month norm for the industry. Nevertheless, after the Ambassador asked about participation by U.S. companies, he offered that the GoA is quite open to "diversifying its risk" with competitive bids from G.E., Alstrom, and Toshiba. He praised the performance of electricity turbines provided by GE Canada in a generating facility in Santa Cruz province. (Note: GE told us separately that it is unlikely that they can meet the delivery timeframe required and that they believe it unlikely Siemens will be able to meet the timeframe for all the plants, even if they say they can. End Note). ¶4. (SBU) Before this new capacity comes on line in the coming years, there will be "risky" periods where domestic generating capacity will be strained, De Vido said, especially when temperatures fall below 10 degrees centigrade. But there will not be "critically risky" periods ahead that would put national production at risk, he assured. He attributed recent nationwide energy shortages (Ref B) to "the coldest June in 50 years." With the incorporation of planned new thermal and hydro capacity in the coming three years along with planned incorporation of Atucha II, a new 700 MW nuclear facility in Buenos Aires province in 2011, De Vido said, Argentina will have "turned the corner on energy infrastructure." ¶5. (SBU) In response to the Ambassador's question on a dearth of GoA energy conservation efforts (Ref B),De Vido said a comprehensive plan to save roughly 1,000 MW/day will be rolled out following October elections. This conservation plan will include GoA-subsidized programs to allow consumers to trade in energy inefficient white goods (refrigerators first, air conditioners second) for more efficient models. GoA subsidies will also be provided to bring prices of energy efficient lighting to more affordable levels. ¶6. (SBU) Finally on energy, De Vido noted that President Kirchner had been pleased to meet with senior Apache Energy officials earlier this month (Ref C),especially given the company's commitment to re-invest up to $9 per barrel of oil recovered in Argentina, vs. an industry average of $3 re-invested per barrel. -------------- "We Have A Broad Public Infrastructure Plan" -------------- ¶7. (SBU) In response to the Ambassador's question on the infrastructure development plans of Presidential front-runner Senator Christina Kirchner, De Vido explained that the GoA has already developed a long term national infrastructure plan -- a "Bicentennial Plan" (in honor of the upcoming 2010 200th anniversary of Argentina's declaration of independence) that spans the gamut of domestic energy, road, and rail development along with regional transportation and energy integration with Argentina's Southern Cone neighbors. -------------- HDTV -------------- ¶8. (SBU) Ambassador noted that the Advanced Television System Committee (ATSC) would hold a technical workshop in Buenos Aires July 25 to promote the technical superiority of the U.S. high definition TV standard. De Vido offered that a final decision would likely not be made before October elections and may not be made until the new President takes office. -------------- Civil Aviation -------------- ¶9. (SBU) The GoA is pleased, De Vido said, at the signing of an updated bi-lateral civil aviation accord that will allow for a gradual doubling of flight frequencies between the U.S. and Argentina. Ambassador noted that U.S. carriers are already applying to U.S. government authorities for new routes that will help build tourism and commercial ties between our nations. Ambassador also noted that a bill passed by parliament two months ago to re-configure the Aeropuertos 2000 national airport management concession has been pending the President's signature for some time. U.S. carriers are eager to see this bill become law as it incorporates significant aircraft parking and terminal rental fee reductions they had long been seeking. De Vido said that the President should be signing the bill within a matter of days. -------------- Information Technology Roundtable -------------- ¶10. (SBU) Ambassador noted that feedback from U.S. companies who attended the May 23 information technology roundtable co-hosted by the Ambassador and Minister De Vido was very positive and provided De Vido with a U.S./GoA pubic-private partnership vehicle to promote higher education and research. Participating companies agreed that Argentina is one of their strategic regional locations to develop and guarantee their global competitiveness in IT services. WAYNE