This excerpt taken from the TGS 20-F filed Jun 27, 2006.
ECONOMIC CONDITIONS OF ETHANE SUPPLY UNDER SCHEME 1
The price of the Ethane (EP) to be delivered by TGS to PBB within the first two years of the term of this agreement (years 2006 and 2007), shall remain fixed at US$ 250/MT.
This price does not include Value Added Tax. In the event that in the future the supply of Ethane in any of the two schemes is reached by other taxes that should be born by PBB, they shall be included and discriminated in the respective invoices.
For the subsequent years the EP shall be calculated in accordance with the following formula:
EP = PREMIUM + GAS FACTOR
Final price of Ethane to be paid by PBB (US$/ MT)
Cost and producers margin (US$/ MT) The Premium is fixed at 115 US$/MT.
It is the product of the current Gas Component of the Ethane price formula (GC) and the DELTA GAS PRICE where
DELTA GAS PRICE =
Ratio between the Citygate Bahía Blanca price as of the date of the application of the respective adjustment (GP) and the reference price defined as 2,20 U$S-MMBTU.
GP value shall be determined based on the arithmetic average of transportation tariffs and the Natural Gas price during the period of 90 days prior to the dates on which, in accordance with Article 6.2.2 hereof, a GAS FACTOR adjustment is applicable, in connection with a mix constituted 50% by the Natural Gas proceeding from the Austral basin (including its corresponding transportation cost from that basin to Bahía Blanca) and 50% Natural Gas proceeding from the Neuquén basin (including its corresponding transportation cost from that basin to Bahía Blanca) .
The values of the transportation tariff and the price of Natural Gas shall be governed by the following parameters:
The transportation tariff (FT Tariff) shall be the one set forth by the Enargas Resolution effective on the date hereof for Transportadora de Gas del Sur S.A. and for its calculation the routes Tierra del Fuego-Bahía Blanca y Neuquén-Bahía Blanca shall be considered with a basin mix of 50% for each one, added to: (i) the grossing up of turnover tax; (ii) the cost of the corresponding retained gas; (iii) the charges of the gas trust applicable to such routes and other charges and taxes that might eventually be levied in the future and that are applicable to the shipper.
The price of Natural Gas shall be determined considering the price paid by industrial consumers in Argentina, provided their consumption is higher than 9,000 cubic meters per month and they acquire Natural Gas directly from producers or distribution companies at the point of injection to the transportation system in the basins of Neuquén and Austral.
The supply segment shall be the one resulting from the weighing of gas prices and volumes of the industrial consumers mentioned above, both in Long and Short Term Purchases, excluding purchases in the Spot Market, and those sales verified among producers integrated with industrial consumption in which they participate directly or indirectly.
If the supply market destined to thermoelectric generation should have similar conditions, such as terms, freedom of volumes to trade, suppliers and prices, the prices derived from these contracts shall be included as part of the market segment to be considered.
One year prior to the date of the readjustment of prices, the index or weighted price reflecting the supply segment referred to in this Article shall be analyzed, considering the basins mix defined herein (50% Neuquen basin and 50% Austral basin).
In the event that any Party deemed it impossible to obtain objective and reliable public information, it may request the intervention of a third party to determine such values. The third parties to whom the Parties shall delegate this function shall be the consultants G&G Energy Consultants (represented by Mr. Daniel G. Gerold) with address at 235 Carabelas St. 7th Floor of the Autonomous City of Buenos Aires and Purvin & Gertz (represented by the firm Freyre y Asociados) with address at Suipacha St N° 1029, 2° Floor of the Autonomous City of Buenos Aires, both acting by mutual consent (hereinafter the Technical Arbitrator). The decision of the Technical Arbitrator shall be final and binding upon the Parties. In the event that the two mentioned consultants should not reach an agreement, a third party shall be selected by mutual consent between the Parties, or if no agreement is reached, through the Procedures for settlement of disputes set forth herein. The consultants mentioned above may be replaced during the term of this agreement, TGS being entitled to replace G&G Energy (or its successive replacements) and PBB being entitled to replace Purvin & Gertz (or its successive replacements)
Notwithstanding the preceding formula, it is agreed that the EP in no event shall be inferior to 250 US$/MT, that the maximum EP shall be determined based both on the PREMIUM -and the maximum adjustment allowed for same in accordance with Article 6.2.1 hereof- and on the GAS FACTOR -and the maximum adjustment allowed for same in accordance with Article 6.2.2. hereof.