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


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Summary
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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

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Measures to Deal with Energy Crisis
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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.

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"We Have A Broad Public Infrastructure Plan"
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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.

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HDTV
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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.

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Civil Aviation
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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.

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Information Technology Roundtable
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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