Petropar awards fuel contracts to YPF, Petrobras, Glencore

Paraguay's state oil firm Petropar has awarded contracts to Argentine company YPF, Brazil's federal energy company Petrobras and Swiss trader Glencore to supply a total of 380 billion cubic meters of gas oil through January 2005, Petropar fuels purchasing manager Balbino Ferreira told BNamericas. Petropar has awarded 40% of the fuel supplies to YPF, and 30% each to Petrobras and Glencore, Ferreira said. The contracts will be to supply fuel for four months from October through January. Petropar plans to sign contracts with the companies by September 20, Ferreira said. YPF offered to supply the fuel for a premium of US$27.69 a cubic meter over international prices, which Glencore and Petrobras will also receive, Ferreira said. The premium is about US$5 more than the premium YPF offered in a tender Petropar held in July to supply fuel for six months. "It's quite a bit more expensive than the previous tender," Ferreira said. Petropar declared the July tender void because the prices offered were considered exorbitantly high, and it aimed to obtain a lower price on the spot market. However, the plan has backfired and now Petropar will be forced to spend some US$5mn more to cover its fuel needs than it would have spent had it bought the fuel through the previous tender, Ferreira said. "It would have been better to buy fuel through that tender but we thought the price would improve so we declared the tender void," Ferreira said. "The price has turned out to be more expensive but there's nothing we can do now." Ferreira says the bigger premium is due to refining problems in Argentina and higher transport costs. "YPF says they have problems with refining in Argentina and they will have to import fuel from overseas to supply Paraguay," Ferreira said. SECOND BIDDING ROUND Petropar plans to begin "very soon" to draw up bidding rules for a new tender to buy six months of fuel supplies from February 2005, Ferreira said. The company plans to call for bids once the direct purchase contracts for fuel supplies are signed within the next week, he said. Companies that already qualified for the first tender are automatically qualified to bid on this second tender, but the bidding rules will be available to other companies as well, Ferreira said. Another possibility is that Paraguay's government could negotiate to buy fuel from Venezuela's state oil company PDVSA, local newspapers reported, but "the state-to-state negotiations are being managed at the government level," Ferreira said. Paraguay's President Nicanor Duarte is expected to visit Venezuela in November to discuss with President Hugo Chávez a proposal for PDVSA to supply fuel to Paraguay. "Meanwhile we will prepare bidding rules and start this other tender but we will see what happens on the way because we have time until January," Ferreira said. Paraguay is expected to ask Venezuela for a 3-4 month grace period before starting fuel payments because Petropar does not have the cash to pay for fuel beyond January, Ferreira said. "We don't have the money to pay the 75% that Venezuela offers with 25% on credit," Ferreira said, adding that the company is already in debt and it must pay for fuel purchases through January in a period of 90 days. DEREGULATION The IMF is putting pressure on the Paraguayan government to deregulate the fuel distribution market. Petropar currently has a monopoly on fuel distribution in the country, and the price fixed by the government is a "political price," Ferreira said. The idea is for the government to pass legislation in the next six months to deregulate the industry, allowing private companies to compete with Petropar. "By the end of the year we should have a clearer idea of what is going to happen but right now we're in a wait-and-see mode," Ferreira said. As a result of the proposed deregulation prices are likely to rise sharply, hitting consumers in the pocket because the government currently subsidizes the price. "It's not very easy for us [to deregulate prices] because there are many social problems and there is a law that regulates the fuel business," Ferreira said.