Argentina: Pan American Energy principal Carlos Bulgheroni

UNCLAS BUENOS AIRES 000131 SIPDIS SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ECON EFIN BEXP OVIP AR SUBJECT: Argentina: Pan American Energy principal Carlos Bulgheroni on New Oil/Gas Discovery and Bilateral Cooperation Ref: 07 Buenos Aires 2313 -------------- Summary -------------- ¶1. (SBU) In a January 28 meeting with Ambassador, Pan American Energy principal and GoA insider Carlos Bulgheroni (protect) detailed Pan American's significant new oil/gas discovery in Chubut province, Pan American's intent to significantly expand its hydrocarbon development budget and the company's concerns over the short sighted disincentives to new exploration resulting from the GoA's imposition of new hydrocarbon export tariffs. Commenting on recent USG/GoA bilateral frictions, Bulgheroni called the two Kirchner administrations the hardest and "most impenetrable" in his 50-year experience with which to maintain a dialogue. To improve strained bilateral ties, Bulgheroni said he planned to ask President Kirchner later that day for strong GoA support of a variety of programs including a planned April visit of the Kennedy Center International Committee, and expanded CSIS and Council of the Americas-sponsored programs. These include working with CSIS to send members of Argentina's Congress to the U.S. to meet with their U.S. counterparts, and having Chief of Cabinet Alberto Fernandez and first husband Nestor Kirchner travel to New York City, probably in the first two weeks of March, to participate in a Council of Americas event. (President Kirchner confirmed to Ambassador subsequently that Bulgheroni had raised these issues with her.) Bulgheroni also supported expanded contact and exchanges between the U.S. and Argentine justice systems. End Summary. -------------- Chubut Oil/Gas Discovery -------------- ¶2. (SBU) Ambassador met January 28 with Carlos Bulgheroni, principal of family-owned Bridas Energy, which is a 40% partner (with British Petroleum) in Pan American Energy, the second largest crude oil producer in Argentina. Bulgheroni note that he would be meeting later that day with President Cristina Fernandez de Kirchner (CFK) to brief her on Pan American's announcement of a new 100 million barrel on-shore oil and gas field discovery in Chubut province's Cero Dragon basin, where the bulk of Pan American's reserves are concentrated. The discovery, he said, will add roughly 4% to Argentina's declining reserve base, and he planned to announce to the President a doubling of Pan American's 2008 investment budget to US$ 1 billion. (Note: Chubut Governor Mario Das Neves earlier had announced that Pan American's discovery was the biggest in Argentina in years and would double the province's production. The province produces roughly 25% of Argentina's oil and 7% of natural gas production. End Note.) -------------- Burden of Hydrocarbon Export Taxes -------------- ¶3. (SBU) Bulgheroni said that Pan American has been the only Argentine oil company to add production and reserves in recent years and called the discovery a signal of what can be done. He said he would use his meeting with CFK to raise the serious burden on Pan American that the GoA's recent raising of hydrocarbon export tariffs has imposed. These new export taxes violate Pan American's recent 10-year concession extension agreement signing with the province of Chubut, and Bulgheroni said that he hopes to resolve this matter without have to go to international arbitration (Pan American had suspended a longstanding separate ICSID suit as a condition of it Chubut concession extension agreement). One possible option, he said, would be to agree with the GoA to exempt production from newly added reserves from new export taxes. ¶4. (SBU) The GoA's imposition of new hydrocarbon export tariffs, intended to raise revenues and keep domestic prices down, completely neglects the pressing need to encourage private hydrocarbon company exploration to increase Argentina's reserves and sustain production, Bulgheroni said. He called this lack of long-term vision typical of this (and of many previous) governments' vision. -------------- -------------- U.S. Argentine Ties: Kennedy Center, CoA and CSIS -------------- -------------- ¶5. (SBU) Bulgheroni, who is the co-chair of the Kennedy International Committee, said he planned to raise with CFK her possible involvement in the Committee's upcoming visit in April, which will overlap with a seminar on arts management conducted in Buenos Aires by Kennedy Center President Michael Kaiser. Bulgheroni sees senior GoA participation in these visits as a productive way to build human ties between the two countries. He hopes to follow-up by establishing an agreement between the Kennedy Center, the GoA, and the City of Buenos Aires for the training and education of artists and staff of the Colon Theater; the Kennedy Center has such agreements in place with about 15 countries. The GoA's initial response to his proposals has been very positive, Bulgheroni said. ¶6. (SBU) Bulgheroni also planned to suggest GoA support for expanded CSIS and Council of the Americas-sponsored programs on Argentine-U.S. topics for the year ahead. Through CSIS he is working to bring members of Argentina's Congress to the U.S. to meet with their U.S. counterparts, as they have done in the past (often with PAS funding). With the Council of the Americas, Bulgheroni has been discussing with Chief of Cabinet Alberto Fernandez the idea of having Fernandez and first husband Nestor Kirchner travel to NYC, probably in first two weeks of March, to participate in the first of these. He called this a very informal way to get Nestor Kirchner more interested in international affairs and more comfortable with the United States. -------------- Justice Systems Contact/Exchanges -------------- ¶7. (SBU) Bulgheroni sees the potential for expanded contact and exchanges between the U.S. and Argentine justice systems as vitally important: if such exchanges can help build more respect for law and better enforcement of law and contracts in Argentina, he feels it will really help change the system from within. -------------- -------------- Bilateral Frictions: An Impenetrable CFK Administration -------------- -------------- ¶8. (SBU) Ambassador explained the USG perspective on recent bilateral frictions and said Embassy would like to work with Bulgheroni on these various projects. Bulgheroni (protect) said he understood completely the U.S. perspective on recent events and the GoA's reaction. He said he has dealt with every Argentine government since 1958 and this one seems the hardest and "most impenetrable" one with which to establish and to maintain a good dialogue on issues. Yet, he believes it is worth the effort to keep trying. WAYNE