ARGENTINA: Oil Boom

Into the town of Comodoro Rivadavia on the windswept Patagonian coast flew President Arturo Frondizi last week to celebrate the 52nd anniversary of the day an Alsatian engineer, drilling for water, brought in the country’s first paying oil well. What Frondizi saw, touring by open car, was a brash and bustling boom town (pop. 23,000) where the sprawling trailer camps are guyed by wire against the 75m.p.h. gales, where tricky tides buffet the three to four ships putting in daily at the busy port, where U.S., British, Dutch and Italian oilmen elbow up in nightclubs to watch chorus lines as sprightly as the best in Buenos Aires.

The Gamble. The Comodoro Rivadavia field is a dramatic sample of a daring gamble by Frondizi that paid off. Bucking emotional Argentine nationalism, Frondizi last year invented an imaginative patchwork of “service and development” contracts between foreign oil companies and the state monopoly, Yacimientos Petroliferos Fiscales (YPF). The device has paid off in 17 months with more than 100 new wells from chilly Tierra del Fuego to mountain country near the Bolivian border. Oil production is up 30%, to 44 million bbl. a year.

The contracts give YPF all the oil and, upon expiration in 20-30 years, the wells themselves. To come in on such terms, the companies demanded and got a fast payoff. For getting YPF’s oil out of the ground and to the wellhead, the Carl M. Loeb, Rhoades group, investing $100 million, will get 70% of the world oil price until its investment is amortized. 15-20% after that. Five other big companies (Pan American International, Esso, Shell, Union Oil of California, Tennessee Gas

Transmission) signed up on a similar profit-sharing basis for a minimum investment of $126 million.

The time limit of the contracts made speed advisable, and the companies moved fast. Texas’ Loffland Bros., drilling for Pan American, shipped ten rigs to Comodoro Rivadavia within 60 days after the deal was closed, so far has brought in 81 wells. The Loeb, Rhoades group, on proven ground in central Mendoza province, has brought in 48 wells; Tennessee Gas hit four producers in Tierra del Fuego. Wildcatting in Patagonia, Union Oil brought in a new field in November.

Contagion. Some of the oil fever rubbed off on bureaucratic, bumbling YPF. “The Americans are teaching us many new ways,” said a YPF engineer last week. “They have instilled in the whole area an attitude that work can be fun, too.” Now rating top priority in Frondizi’s budget, YPF will drill 4,100 wells on its own by 1965, has let contracts to Kerr-McGee, Southeastern Drilling and the Italian ENI for another 1,800.

As proof of the Frondizi policy pours in, nationalistic outcries have died. Oil imports, which caused a crippling trade deficit, dropped from $280 million in 1957 to $174 million this year, and will cease in 1961. As befits a nation ranking twelfth in the world in proven oil reserves, Argentina plans to be selling a yearly 25 million bbl. of petroleum abroad by 1964.