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DE RUEHBU #0131/01 0351608
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R 041608Z FEB 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0173
INFO RUEHC/DEPT OF LABOR WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC

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 
 
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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