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Buenos Aires — Argentina is seeking to rebuild natural gas production after years of decline, offering higher prices on output from new developments, an Energy Ministry source said Friday.

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"The program is designed to encourage exploration and increase production," the source said on the condition of not being named.

The program took effect Thursday and will run until December 31, 2018, according to a resolution in the Official Bulletin, the newspaper of record.

The output from new projects can be sold at $7.50/MMBtu, according to the resolution. That's up from a current average of $5.20/MMBtu.

Article Continues below...

"It is necessary to continue with programs to increase gas production in the short term, reduce imports and encourage investment in exploration and production from new deposits that will make it possible to recover reserves," the Energy Ministry said in the resolution.

Argentina has been ramping up gas imports since production started to decline from a record 143 million cu m/d in 2004, now down 16% at 120 million cu m/d. This has led to shortages as consumption has surged to 130 million cu m/d, with peaks of 180 million cu m/d during the cold months of May to September.

The country is importing about 30 million cu m/d from Bolivia, Chile and off the global LNG market to help make up the shortfall, and plans to bring in more supplies next year from a floating regasification terminal in Uruguay.

Argentina relies on gas to meet 50% of its energy needs.

Recent hikes in wellhead prices to an average of $5.20/MMBtu from around $3/MMBtu have pushed up gas utility rates, sparking protest.

Mario Das Neves, governor of the southern province of Chubut, called on the national government, which handles energy pricing, to backtrack on the hikes.

"My position is that the increases must be rolled back," Das Neves said in a statement Friday, adding that other governors are demanding the same.

While the national government said the hikes in gas utility rates would be around 300%, some consumers have said that they've been much higher.

The Argentine Confederation of Small and Medium Businesses said Thursday that companies in Patagonia, a southern region and source of most of the country's gas, have received gas bills with hikes of up to 2,000%.

"For many businesses, this is impossible to pay," the confederation said in a statement.

--Charles Newbery,
--Edited by Jason Lindquist,