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Argentine President to Nationalize Oil Company
By SIMON ROMERO and RAPHAEL MINDER
Published: April 16, 2012
RIO DE JANEIRO — Argentina’s president, Cristina Fernández de Kirchner, announced on Monday that the government would seize a majority stake in YPF, the nation’s largest oil company.
The expropriation would reassert state control over an important pillar of Argentina’s economy but has already led to diplomatic tensions with Spain and other countries, including the United States.
Under Mrs. Kirchner’s plan, which she announced on national television, Argentina’s government would take a 51 percent controlling stake in YPF, which is currently majority-owned by a Spanish energy company, Repsol. Argentina’s central government would keep 51 percent of the country’s stake and give 49 percent to its provinces. The plan is part of a bill submitted to Argentina’s Congress.
Repsol owns 57 percent of YPF and has opposed the idea of a forced sale. It was not immediately clear how YPF’s shareholders, which include Argentina’s Eskenazi family, would be affected by the takeover or compensated for their shares.
Mrs. Kirchner said the expropriation of YPF, a storied company founded by Argentina’s government in the 1920s and privatized in the 1990s, was a “recovery of sovereignty and control.” She said the move would allow Argentina to raise production, after the country recently became an energy importer.
Her announcement comes after months during which her government and provincial officials exerted pressure on YPF in order to get the company to raise investments. These tactics had included revoking concessions for coveted fields.
YPF’s shares plunged in value after Mrs. Kirchner delivered her remarks, although they recovered slightly and were down about 11 percent in midday trading in New York. Antonio Brufau, the chief executive of Repsol, Spain’s largest company, had been trying for days to meet personally in Buenos Aires with Mrs. Kirchner, but was rebuffed.
Mrs. Kirchner has already nationalized an airline, Aerolíneas Argentinas, and pension funds while also pressuring companies to repatriate export proceeds in an effort to slow capital flight. Expropriating YPF sends a new signal about Argentina’s policies toward foreign investment, especially in the energy sector.
The move comes after huge discoveries of shale oil resources were made in the last year in Argentina. The French oil giant Total and the American companies Exxon Mobil and Apache are among those making investments in Argentine shale fields.
But energy experts warned that the expropriation of YPF could curb the activities of energy companies seeking to replicate in Argentina the recent success in the United States of rapidly bolstering shale oil production.
Fadel Gheit, a senior oil analyst at Oppenheimer & Co. in New York, said the perception of financial risk associated with Argentina had ratcheted up considerably as a result of Mrs. Kirchner’s move to take over YPF, in comparison with other countries where companies are pursuing shale deposits.
“I worry less about Apache’s operations in Egypt than in Argentina,” said Mr. Gheit. “The oil industry in Argentina is just getting ready to take off, but this may be a way to kill it in its infancy.”
The Spanish government had warned Friday that it would take unspecified retaliatory measures against Argentina if YPF’s nationalization went ahead and said the action could turn Argentina into “an international pariah.”
On Monday evening, however, it was more cautious. Without detailing what Spain’s response would be, María Dolores de Cospedal, secretary general of Spain’s governing Popular Party, told reporters after a meeting with Prime Minister Mariano Rajoy that “I don’t have any doubt that it will be the most adequate response to defend Spanish interests.”
The takeover of YPF in 1999 by Repsol turned Spain’s former national oil company into a sizable international player. While Repsol subsequently made investments in other emerging markets, it also sold in 2010 part of its Brazilian business to Sinopec of China. Over all, YPF accounts for two-fifths of Repsol’s estimated reserves of crude oil and one-third of the company’s profits.
The tussle with Buenos Aires came at a bad economic time for Repsol and the government in Madrid. The government is already desperately fighting to dampen the impact of Spain’s second recession in three years and faces soaring borrowing costs amid investor concerns about whether Spain will be the next euro economy to require a bailout.
Any attack on Repsol is also likely to raise alarm bells for Telefónica, the telecommunications operator, and other Spanish companies that have invested significantly in Argentina and have come to rely on their Latin American assets to offset dwindling revenue at home.
Raphael Minder reported from Madrid. Charles Newbery contributed reporting from Buenos Aires
By SIMON ROMERO and RAPHAEL MINDER
Published: April 16, 2012
RIO DE JANEIRO — Argentina’s president, Cristina Fernández de Kirchner, announced on Monday that the government would seize a majority stake in YPF, the nation’s largest oil company.
The expropriation would reassert state control over an important pillar of Argentina’s economy but has already led to diplomatic tensions with Spain and other countries, including the United States.
Under Mrs. Kirchner’s plan, which she announced on national television, Argentina’s government would take a 51 percent controlling stake in YPF, which is currently majority-owned by a Spanish energy company, Repsol. Argentina’s central government would keep 51 percent of the country’s stake and give 49 percent to its provinces. The plan is part of a bill submitted to Argentina’s Congress.
Repsol owns 57 percent of YPF and has opposed the idea of a forced sale. It was not immediately clear how YPF’s shareholders, which include Argentina’s Eskenazi family, would be affected by the takeover or compensated for their shares.
Mrs. Kirchner said the expropriation of YPF, a storied company founded by Argentina’s government in the 1920s and privatized in the 1990s, was a “recovery of sovereignty and control.” She said the move would allow Argentina to raise production, after the country recently became an energy importer.
Her announcement comes after months during which her government and provincial officials exerted pressure on YPF in order to get the company to raise investments. These tactics had included revoking concessions for coveted fields.
YPF’s shares plunged in value after Mrs. Kirchner delivered her remarks, although they recovered slightly and were down about 11 percent in midday trading in New York. Antonio Brufau, the chief executive of Repsol, Spain’s largest company, had been trying for days to meet personally in Buenos Aires with Mrs. Kirchner, but was rebuffed.
Mrs. Kirchner has already nationalized an airline, Aerolíneas Argentinas, and pension funds while also pressuring companies to repatriate export proceeds in an effort to slow capital flight. Expropriating YPF sends a new signal about Argentina’s policies toward foreign investment, especially in the energy sector.
The move comes after huge discoveries of shale oil resources were made in the last year in Argentina. The French oil giant Total and the American companies Exxon Mobil and Apache are among those making investments in Argentine shale fields.
But energy experts warned that the expropriation of YPF could curb the activities of energy companies seeking to replicate in Argentina the recent success in the United States of rapidly bolstering shale oil production.
Fadel Gheit, a senior oil analyst at Oppenheimer & Co. in New York, said the perception of financial risk associated with Argentina had ratcheted up considerably as a result of Mrs. Kirchner’s move to take over YPF, in comparison with other countries where companies are pursuing shale deposits.
“I worry less about Apache’s operations in Egypt than in Argentina,” said Mr. Gheit. “The oil industry in Argentina is just getting ready to take off, but this may be a way to kill it in its infancy.”
The Spanish government had warned Friday that it would take unspecified retaliatory measures against Argentina if YPF’s nationalization went ahead and said the action could turn Argentina into “an international pariah.”
On Monday evening, however, it was more cautious. Without detailing what Spain’s response would be, María Dolores de Cospedal, secretary general of Spain’s governing Popular Party, told reporters after a meeting with Prime Minister Mariano Rajoy that “I don’t have any doubt that it will be the most adequate response to defend Spanish interests.”
The takeover of YPF in 1999 by Repsol turned Spain’s former national oil company into a sizable international player. While Repsol subsequently made investments in other emerging markets, it also sold in 2010 part of its Brazilian business to Sinopec of China. Over all, YPF accounts for two-fifths of Repsol’s estimated reserves of crude oil and one-third of the company’s profits.
The tussle with Buenos Aires came at a bad economic time for Repsol and the government in Madrid. The government is already desperately fighting to dampen the impact of Spain’s second recession in three years and faces soaring borrowing costs amid investor concerns about whether Spain will be the next euro economy to require a bailout.
Any attack on Repsol is also likely to raise alarm bells for Telefónica, the telecommunications operator, and other Spanish companies that have invested significantly in Argentina and have come to rely on their Latin American assets to offset dwindling revenue at home.
Raphael Minder reported from Madrid. Charles Newbery contributed reporting from Buenos Aires
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