Argentina bids to turn around sagging oil and gas production through nationalization
Buenos Aires - Argentina's government Monday announced plans for nationalization of the country's biggest energy company YPF, controlled by Spain's Repsol, in a bid to turn around the sagging domestic oil and natural gas output.
The move comes in the backdrop of increased Argentine pressure on the Spanish-owned oil company YPF-Repsol to step up hydrocarbon investment to help improve the oil and gas production.
The shortage of both oil and gas is reverberating throughout the economy, forcing Argentina to become a net importer of expensive fuel to meet domestic demand.
Kirchner and provincial governors say private-sector companies haven't invested enough in exploration and production, leading to drop in domestic production.
The decision taken by President Cristina Kirchner in consultation with her cabinet colleagues, has drawn expressions of concern from Spain and the EU.
Reading a statement at the meeting, an official said YPF-Repsol "is declared a public utility and subject to expropriation of 51 per cent of its assets."
The remaining 49 per cent would be distributed among Argentina provinces that produce oil, the declaration said.
Spain immediately said it would respond to the move. Ruling party spokeswoman Maria Dolores de Cospedal said Madrid would "give an appropriate response" to the expropriation.
Over the last few weeks 16 provinces have revoked YPF oil concessions on grounds that the company was not meeting its investment obligations.
Under the proposed nationalization of YPF assets, Argentina and its provinces will acquire 51% of the 57.4% of YPF shares held by Repsol, while the rest of the shares will remain in the hands of other investors. YPF produces a third of the country's 570,000 barrels per day of oil, close to a quarter of its 125 million cubic meters per day of gas and has a 50%-60% share of diesel and gasoline sales.
Until last week the government and the provinces had focused their attacks on YPF, a former state oil company privatized in the 1990s and bought by Repsol.
But that changed when Neuquen Province broadened the scope of its targets to include other foreign investors, jeopardizing badly needed investment in the sector, analysts say.
If the takeover is approved, which seems likely as the ruling party has majority in both house of parliament, Repsol will retain about 6% of the company, while Argentina's Grupo Petersen will retain 25%. The rest of the shares are traded publicly in Buenos Aires and New York.
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