A woman holds an Argentine national flag in front of the presidential palace after Argentine President Cristina Fernandez de Kirchner announced that oil company YPF, controlled by Spain's Repsol, is subject to expropriation and that a bill being introduced would give the state a 51 percent share, in Buenos Aires on April 16, 2012. (AFP Photo / Daniel Garcia)
Is it theft on a grand scale or simply the legitimate re-nationalization of a country’s resources for the benefit of the people?
Argentina’s decision to take control of the country’s largest oil company YPF has created a schism in the international community—with winners and losers falling into place along the divide.
YPF, Argentina’s largest oil company, was privatized in 1993 and purchased at the time by Spain’s Repsol which up until this latest move owned 57% of the company. Claiming Repsol had not lived up to an agreement to invest in the infrastructure of the country, Argentina’s President Christina Fernandez announced her intentions of reclaiming the energy company.
The new ownership structure would give the federal government 51% control of YPF, with the remaining 49% of the company divided amongst the energy producing governments of the country. Repsol’s controlling interest in the company under this formula would be reduced to a paltry 6%.
Repsol is angered by the move calling it an “illegitimate and unjustifiable act.” In recent weeks talks about the possibility of nationalization have been driving stocks for YPF down, but still a conservative estimate of the value of the company is more than $13 billion. As compensation for the nationalization of their privately held subsidiary, Repsol has asked for a sum of around $10.5 billion, but it is unlikely that the company will receive that amount if anything at all.
Repsol may even be fined by the Argentinean government for environmental damage to the country’s interior—meaning Respol might have to pay Argentina for the government takeover. The company has also maintained that the move by President Fernandez is primarily a political one, to try and gain public support amidst a continuing energy crisis in Argentina.
Also, under the guidance of Repsol, YPF recently discovered vast amounts of shale rock oil reserves in the Vaca Muerta basin. This important find puts Argentina on the map as the holder of the world’s third largest shale gas reserves behind China and the United States. Repsol believes the current nationalization movement is nothing more than an obvious grasp for control of this major discovery. Having been set up through privatization in the 1990’s, then allowed to develop the company for 20 years; the first “loser” in this complicated and controversial process would have to be Repsol. Continue reading