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Petrobras makes statement on Uruguay distribution issues

Published by , Senior Editor
World Pipelines,

With regard to issues preceding the international arbitration processes resorted to by its natural gas distributors in Uruguay – Distribuidora de Gás de Montevideo S.A. (DGM) and Conecta S.A. – Petrobras has announced some clarification.

The clarifications are as follows: 

The conditions under which its Uruguayan gas distributors’ concessions were entered into originally, in 1994 and 1999, respectively, did not remain the same. Changes in the conditions for exporting Argentinean gas to Uruguay, the country’s sole source of supply, caused supply restrictions and financial imbalance in the Uruguayan distributors’ contracts, especially as of 2008. The price of importing Argentinean gas to Uruguay rose eight fold between 2005 and 2015.

Over the years, Petrobras’ companies in Uruguay made many administrative requests and meetings were held between company leaders and Uruguayan ministers and other officials, seeking collaboration to solve the structural problems affecting the concession contracts, but to no avail.

The construction of a regasification plant in Montevideo’s port area, initially planned by the government to start up in 2015, could have solved the supply problem. However, that year, the Uruguayan government officially announced a halt to the project.

As of May 2017, the Uruguayan distributors’ gas supply conditions grew worse. The gas became more expensive and new costs were not duly passed on to prices by the Uruguayan state. A new contract, negotiated between Uruguayan state-owned enterprise Administración Nacional de Combustibles, Alcohol y Portland (ANCAP) and Argentinean state-owned enterprise Energia Argentina S.A. (ENARSA), and not involving the distributors, is now the only option for acquiring gas in Uruguay.

In May, the Uruguayan government decided to invoke a bank guarantee for DGM’s concession, alleging failure to honour part of the lease payments for the use of granted property. DGM had challenged the legitimacy and legality of this payment, as it considered that it had arisen from the abusive inclusion of Argentinean taxes and royalties in the Uruguayan government’s calculation of the charge. DGM had been paying the part of the lease payments that it agreed to, while challenging the other part in the administrative sphere.

Petrobras’ distributors continue to comply with all their obligations and maintain their gas distribution services at the highest industry standards of quality and safety.

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