Reversing a longtime opposition to increased foreign involvement in the oil business here, Argentine authorities have opened a number of land and offshore areas for exploration by multinational companies.
The milestone change of mind by the ruling Radical Party, which 23 years ago annulled contracts with foreign oil firms, came last week in a series of bids accepted from several international companies for drilling rights. The awaited event confirmed a pledge made by President Raul Alfonsin last March, in Houston, to invite foreign companies to search for Argentine oil.
Response by major oil companies was less than enthusiastic, in part because of the fall in international oil prices. "They couldn't have hit it at a worst time," said a senior official of a major foreign oil company, commenting on Argentina's awkward timing in opening itself to foreign exploration at the moment that the world is awash in discounted petroleum.
The about-face by the Radicals, who took power two years ago after two decades of rule by the military or the Peronists, results more from necessity than any basic shift in philosophy. The deficit-ridden, state-owned oil firm Yacimientos Petroliferos Fiscales (YPF) lacks funds to carry out its own exploration.
With only 10 percent of Argentina having been tested for oil, government officials are hoping that new reserves can be found and exploited for export to earn needed hard currency.
"The government is interested in having private investment," said Energy Secretary Conrado Storani, who initially had resisted the switch. "I'm still against concessions where the dominion of ownership is lost. But we realize that in order to grow, this country needs foreign capital."
The opening to foreign firms coincided with another economic breakthrough announced by the government: the decision to begin selling off some state-owned enterprises. This is a centerpiece of phase two of Alfonsin's so-called austral plan, which now envisions a shift from the largely anti-inflation measures of last year to a more growth-oriented program focused on spurring exports and reducing the state's role in running companies.
Both the oil move and the planned auction of state firms are still encountering opposition from the old guard in Alfonsin's party. It is reluctant -- either for reasons of nationalism or patronage -- to cede state resources to foreign or private hands.
Leading the resistance has been Storani. As energy secretary in 1963, he oversaw the annulment of contracts with foreign oil firms. For most of last year, he insisted on conditions for readmitting foreign firms that the multinationals found unacceptable.
The model contract finally drawn up is still less than pleasing to the giant oil companies, and a number of them stayed away from last week's bidding. Among major American firms, only Exxon, Chevron and Occidental participated. Just 10 of the 32 territorial blocks offered by the government received any drilling bids at all.
Nonetheless, Storani declared the first round "a full success," saying his country did about as well as China and Colombia did when they first took bids. Foreign oil officials were less sanguine in their assessments.
Some foreign firms that held back this time are thought to be waiting for a second round of bids, scheduled for April 1, or are said to be angling for special terms in possible direct negotiations over rights to regions for which no competitive bids were obtained.
Other multinationals are understood to have opted out of Argentina because of dissatisfaction with the model contract and the relatively high-risk nature of those areas available for bidding. Oil experts say the government has withheld from public auction what geologists regard as potentially the most oil-rich sections.
"The reduction in the price of crude will affect oil company earnings in the next few years," the senior oil company official said. "So where do we cut? Exploration. Our company did have an interest in at least one of the Argentine areas put up for bid, but when we prioritized our markets, Argentina got cut."
A principal cause for the 10-month delay in bidding was Storani's insistence that YPF have the option to enter a drilling operation at whatever stage it wanted. The oil companies deemed this unjust.
As a compromise, YPF will have the right to claim a share of from 15 to 50 percent of an oil find, but must declare its intentions at the moment the oil is discovered. If new fields are later found in the same area, the government will be entitled to claim a share.
On the issue of who decides whether an oil find can be developed commercially, private firms are to be given the right, subject to appeal by YPF.
Storani had proposed paying the companies in everything except what they really wanted -- part of the crude they hope to find. As a compromise, the model contract provides for payment in crude as a last resort, should YPF fail to come up with currency or petroleum byproducts to offer as payment.
Argentina is self-sufficient in oil and currently produces about 450,000 barrels per day. Current reserves are 2.3 billion barrels.