President Cristina Fernández de Kirchner of Argentina introduced a bill on April 16, 2012 for the partial renationalization of YPF, the nation's largest energy firm. The state would purchase a 51% share, with the national government controlling 51% of this package and ten provincial governments receiving the remaining 49%. The bill was overwhelmingly approved by both houses of Congress, and was signed by the president on May 5. The government of Argentina eventually agreed to pay US$5 billion in compensation to Repsol, which had previously owned YPF.
Background YPF was founded in 1922 as the first oil company in the world to be established as a state enterprise. The company grew to become largest in its sector in Argentina, and despite the divestiture of a sizable percentage of its extractive, refining, logistic, and retail infrastructure during its 1993 privatization, YPF in 2012 operated 52% of the nation's refinery capacity and accounted for 57% of the national market in gasoline and other motor fuels. Its share of petroleum and natural gas production nationally was 34% and 23%, respectively, in 2011; company revenues that year were US$13.7 billion. The firm was privatized in 1993 on the initiative of President Carlos Menem and Economy Minister Domingo Cavallo pursuant to the State Reform Law of 1989, which authorized the president to present bills to Congress for the privatization of any of the numerous state enterprises in operation at the time. Madrid-based Repsol acquired a majority stake in 1999. Oil and gas production subsequently weakened while demand increased, and in 2011 Argentina recorded the first energy trade deficit since 1987 and it's still in deficit in 2022.
Renationalization Investment in exploration at YPF as a percentage of profits had been far below those in most other Repsol subsidiaries, and fell from 30 new wells in 1998 to eight in 2010 (French energy firm Total S.A. overtook YPF as the leading oil driller in Argentina). Its reserves of crude and natural gas fell 60% and 67% respectively between 1999 and 2011, and declines in output at the firm represented 54% of the nation's lost oil production and 97% in the case of natural gas. Repsol and some market analysts blamed the decline in exploration and production on government controls on exports and prospecting leases, and price controls on domestic oil and gas. YPF, however, remained profitable throughout Repsol's tenure even as output fell, and net income from 1999 to 2011 at YPF totaled nearly US$16.5 billion. The Kirchner administration in turn pointed to high dividend yields and low investment levels at YPF in relation to profits. Argentine Economy Minister Hernán Lorenzino claimed that asset stripping at YPF had financed Repsol's expansion in other parts of the world, while Repsol officials denied charges of underinvestment in its YPF operations and instead cited the Vaca Muerta discovery as a motivation for the takeover. Vaca Muerta, a 30,000 km2 (11,600 mi2) unconventional oil field with proven recoverable reserves of up to 927 million barrels, had been discovered by RepsolYPF in November 2011. Repsol executives declared however that government policies would have to change in order to allow investment in new production. Following bills signed by governors in six fossil-fuel producing provinces during March and April 2012 revoking YPF leases accounting for over a fifth of its production, the president announced on April 16 that the Argentine Government would acquire a majority stake in YPF. Repsol YPF Gas, a liquefied natural gas subsidiary in which Repsol had an 85% stake, was concurrently nationalized on April 19. The Chinese state oil concern, Sinopec, was reported to have been in talks to buy out Repsol's share in YPF – a potential deal scuttled by the Argentine announcement.
… excerpt ends here. Continue reading the full article.
