Nationalized YPF draws more investors

Jan. 4, 2013 at 3:03 PM
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BUENOS AIRES, Jan. 4 (UPI) -- Argentina has drawn more investors to YPF, the majority-owned subsidiary of Spanish oil major Repsol it nationalized last year.

Argentine President Cristina Fernandez defied Spanish litigation threats and international condemnation over the seizure of YPF, securing funds she wants to use to boost Argentina's oil and natural gas production.

Argentina's success with its cash quest for YPF shows that cut-throat competition in the energy industry means where there's oil there will be international players willing to fill any vacuum, no matter what the circumstances.

Repsol is in the early stages of suing Argentina and also taking to court companies that collaborate with the Fernandez administration. At the same time, the Spanish government appears less keen than last year to continue the war of attrition with Buenos Aires over the YPF affair.

In December it lifted a ban on Argentine biodiesel imports that Madrid imposed in answer to the YPF nationalization.

Repsol still hopes to extract compensation for the loss of YPF. Repsol is seeking at least $10 billion in compensation through a U.S. court and has also gone to the International Center for Settlement of Investment Disputes.

Analysts say the U.S. litigation will be costly for Repsol and representation at the ICSID will be long-drawn with no promise of a favorable judgment, much less of a realistic enforcement of any ICSID decision.

Meanwhile, Fernandez has investors making a beeline for Buenos Aires. Energy prices are likely to remain high through 2013 and Argentina's prospects of becoming a larger oil and gas producer continue to draw entrepreneurs to the country, despite frequent public criticism of the government's style of doing business with foreign firms, the specter of the YPF seizure and looming litigation over YPF's past, new and future deals.

YPF announced that Pan American Energy would invest $3.4 billion in boosting Argentina's gas production while Bridas would invest $1.5 billion in Vaca Muerta shale deposits in the eastern province of Neuquen.

The deal with PAE, which is partly owned by BP and Bridas, should provide a 4.3 percent increase in annual gas production from 2013 to 2017, Argentine officials said.

"The agreement with PAE means a fiscal saving of $4.3 billion and will help avoid having to invest $6.8 billion in gas and liquid fuel imports," Federal Planning Minister Julio De Vido said.

The Bridas contract commits the company to drilling 130 exploratory wells in 2013-2014 as part of a pilot project in the Vaca Muerta formation, to be followed by the drilling of 1,000 additional wells in the shale area.

Bridas International S.A. has links with Chinese interests through China National Offshore Oil Corp. Limited plus associations with other companies controlled by the Bulgheroni family, its majority owner.

Earlier in December YPF announced a partnership with the U.S. Chevron Corp. Repsol promptly announced it would sue Chevron.

YPF has also sought partnerships with Norway's Statoil, directly with CNOC and other foreign oil companies.

There are plans also for YPF to team up with Venezuelan oil major PDVSA to explore the South Atlantic continental shelf close to the Falkland Islands British overseas territory.

Argentina claims sovereignty over the Falkland Islands, which its military-led government invaded in 1982.

A resulting conflict with Britain caused the deaths of 649 Argentine troops, 255 British military personnel and three Falkland Islanders. Argentina appears to have torn up the official surrender document at the end of that war, reviving Falklands claims with a more energetic international campaign.

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