Argentine Congress approves bill to nationalize YPF

The Argentine congress approves takeover of YPF

Argentina’s Congress has overwhelmingly approved a takeover of the country’s largest energy company, YPF, from its Spanish controlling shareholder.

The Argentine lawmakers gave their final approval to the nationalization bill on Thursday, giving President Cristina Fernandez de Kirchner the green light to expropriate a 51 per cent stake from Spain’s Repsol, Reuters reported.

The Chamber of Deputies voted 207-32 in favor of the bill, which enjoys nationwide popularity. The nationalizing bill, which was also cleared in the Argentina’s senate last week, heads to the President’s office to be signed into law.

The vote reflects a political victory for Kirchner, who could reach the two-thirds majority in both houses of Congress in order to pass the bill. Meanwhile, people in Buenos Aires staged a massive protest on weekend to support the President’s move.  Continue reading

Argentina Oil Reclamation: An International Debate

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

Executive Order: Federal Government To Take Control of Domestic Natural Gas Production; EPA Set To Move Within One Week

While Americans focused their attention on the Colombian controversy involving U.S. Secret Service agents, prostitutes and excessive drinking, President Obama quietly signed his latest Presidential Executive Order.

The Supporting Safe and Responsible Development of Unconventional Domestic Natural Gas Resources Executive Order seeks to create what amounts to a Presidential super committee that will oversee the regulation and development of the ‘unconventional’ natural gas industry for the purpose of ensuring a long-term natural gas supply for the United States, as well as to do so in a safe and environmentally responsible manner.

Excerpts (Read the complete E.O.):

While natural gas production is carried out by private firms, and States are the primary regulators of onshore oil and gas activities, the Federal Government has an important role to play by regulating oil and gas activities on public and Indian trust lands, encouraging greater use of natural gas in transportation, supporting research and development aimed at improving the safety of natural gas development and transportation activities, and setting sensible, cost-effective public health and environmental standards to implement Federal law and augment State safeguards.

Because efforts to promote safe, responsible, and efficient development of unconventional domestic natural gas resources are underway at a number of executive departments and agencies (agencies), close interagency coordination is important for effective implementation of these programs and activities.  To formalize and promote ongoing interagency coordination, this order establishes a high-level, interagency working group that will facilitate coordinated Administration policy efforts to support safe and responsible unconventional domestic natural gas development.

The target of the legislation is what many believe is the unrestricted and out-of-control drilling practices of hydraulic fracturing, or fracking, a process which blasts water, sand and chemicals underground to stimulate the release of natural gas. Fracking has led to health concerns from environmentalists and others for its potential to pollute the air and contaminate drinking water. Some theories also suggest that fracturing may raise the likelihood of earthquakes in areas like the central United States, an argument that many scientists agree is plausible.

Domestic Fracking Intensity via Gasland

Several industry groups have applauded the President’s move to curtail the industry, with American Petroleum Institute head Jack Gerard saying his organization is “pleased that the White House recognizes the need to coordinate the efforts of the federal agencies that are reviewing, studying or proposing new regulations.” Continue reading