Argentina Faces Motor Fuel Crisis As Strike Drags On - Executive

Argentina faces an imminent threat of fuel shortages as a strike in the key oil-producing provinces of Chubut and Santa Cruz starves the nation's refineries of crude oil, a top industry executive said Thursday.

"This is really a complex issue and as the days go buy I see that [fuel] supplies for service stations are going to be in jeopardy," Tomas Hess, a spokesperson for Exxon Mobil Corp's (XOM) local Esso unit, said in an interview with Radio El Mundo.

U.S. oil giant Exxon Mobil operates about 450 service stations and an 85,000-barrel-a-day oil refinery under the Esso brand in Argentina.

More than 50% of the crude oil processed in Argentina's refineries is sourced from the conflict area and Esso is already cutting back production at its refinery given dwindling crude supplies, Hess said.

"I would say this is affecting practically all the companies" that operate refineries, he said.

"There has to be a breakthrough in this conflict before Monday. If on Monday there isn't a solution we are going to see a lack of [fuel] in the coming days," Hess added.

Argentina's largest integrated oil and gas company, YPF SA (YPF), a unit of Spain's Repsol YPF SA (REP), has been forced to shut down oil production in the two provinces amid a strike by unionized workers that is entering its third week.

The oil workers union that started the conflict accuses YPF of failing to adhere to a collective bargaining agreement and increase salaries. YPF says people linked to the union have destroyed company property, beaten other YPF employees, and blocked critical transportation infrastructure.

YPF offers storage services to several other oil companies in that part of southern Argentina, including Pan American Energy and Occidental Petroleum Corp. (OXY). In addition, virtually all producers in the region rely on the transportation center to send oil to refineries located elsewhere in the country.

The specter of fuel shortage couldn't come at a worse time for Argentine motorists with the start of the summer vacation season in January just weeks away.

Unrest in the country's biggest oil-producing region is also a political embarrassment for President Cristina Fernandez, who with great fanfare brokered a peace deal between oil companies and unions last month aimed at avoiding the kind of strikes that today threaten the country's fuel stocks.

In 2009, some 164 labor disputes, including strikes and roadblocks, affected output on 241 days.

-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740, [e-mail]