YPF-Repsol: un análisis objetivo.

Que una compañía petrolera sea privada, estatal o mixta es instrumental. El verdadero problema radica en si ésta puede satisfacer las demandas de combustibles en forma eficiente. Ya que si esto no es así el peligro se llama: crisis energética y -con certeza- una que tiene implicancias estratégicas.

Facing Energy Shortage, Argentina Steps Up Pressure on YPF-Repsol

By Kyle Younker, Jack Luft | 11 Apr 2012

Argentine officials have been ratcheting up the pressure on Spanish-owned oil company YPF-Repsol, demanding increased investment in hydrocarbon production against a backdrop of declines in output that have made Argentina one of the fastest-growing import markets for natural gas. The threat of a similar scenario with oil has the government on the offensive against the nation’s top energy company.


The gas shortage is reverberating throughout the rest of the economy, driving import restrictions to shore up the trade balance and tighter currency controls to ensure the availability of dollars for purchases of foreign gas. Looking forward, the government's posture on YPF raises questions about how it will exploit its substantial proven reserves of oil and natural gas -- reserves that could eventually turn Argentina into a major player in global energy markets.

So far, threats against YPF have resulted in the stripping of minor concessions by oil-producing provinces -- in Argentina, provinces control all natural resources within their territory. But the government of President Cristina Fernandez de Kirchner is seeking a larger national presence and more favorable terms for the development of the country's oil and natural gas reserves, and talk of a national takeover is swirling once again.

YPF-Repsol is Argentina’s leading hydrocarbon producer, accounting for around 30 percent of both oil and natural gas production, and it controls 60 percent of the country’s refining capacity. But the company’s prospects have declined in the past decade -- a decline for which it is not entirely to blame, according to a report by eight former energy secretaries.

A price freeze in the wake of the 2001 economic crisis left energy companies with little incentive to invest in new projects, the ex-secretaries wrote in a 2011 report (.pdf), causing oil and natural gas production to decline by 18 percent and 8 percent, respectively, from 2003 to 2010. This decline came as both internal demand and international hydrocarbon prices soared.

Economists believe the lower energy prices resulting from the price freeze helped Argentina’s industries and consumers bounce back from the crisis. Most Argentine homes are heated with natural gas, which accounts for more than 50 percent of the national energy matrix, according to the Argentine Energy Secretariat. But after the country faced an energy crisis in the winter of 2004, it cut gas exports to neighboring countries, particularly Chile, which had been brought online by several pipelines built in the 1990s. After that, Argentina began importing natural gas, first from Bolivia, then Trinidad and Tobago, and now Qatar.

Since the government covers the difference between the price of imports and the fixed domestic price, these natural gas purchases have weighed heavily on state finances. In 2011, the government spent $9.4 billion on fuel imports, a number expected to be much higher this year. The shortage has contributed to a current-account deficit, and in response, the Kirchner administration has clamped down on all imports as well as currency purchases to guarantee that dollars will be available for buying foreign gas. It has also attempted to trade soy-based biodiesels for liquefied natural gas to avoid the outflow of dollars and is negotiating higher prices with overseas energy companies such as Apache and Total to encourage investment and production.

But, tellingly, even as the government faces a fiscal bind over natural gas imports, it is focusing its attention on oil production. The specter of having to subsidize oil imports likely triggered a more aggressive response from Argentine officials, leading to the current conflict. Exacerbating the problem is a deal struck in early 2008 at the urging of late former President Nestor Kirchner, in which Repsol sold 15 percent of its shares and control of management in the YPF subsidiary to the Peterson Group, a business aligned with the Kirchner government. To finance the purchase, Kirchner facilitated a loan from Repsol and a consortium of banks that the Peterson Group paid back using 90 percent of YPF's annual profits, leaving the company with little incentive to invest in new production, especially in the context of frozen prices. This arrangement, which amounts to sending dividends to Spain, is now being heavily criticized by the same government that sponsored it in 2008 and that as recently as 2010 called YPF an "example of investment."

The recent attacks on YPF raise the question of how Argentina will find a solution for its current energy impasse, and what it will do to develop its large shale oil and gas reserves. In early February, YPF-Repsol announced the discovery of 22 billion barrels of shale oil in the giant Vaca Muerta oil field. And according to the U.S. Energy Information Administration, Argentina has 774 trillion cubic feet of proven shale gas reserves, the third-largest reserves in the world, behind China and the U.S.

The worst-case scenario would see a continued decline in production, with the state forced to step in to subsidize oil imports. The government would then have to choose between further battering state finances or letting domestic oil prices rise rapidly -- a problematic outcome for an agricultural country that relies on trucking to get its products to port.

Argentina's strategy so far has been to apply pressure on YPF-Repsol, with some speculating that the campaign is an attempt to force YPF-Repsol's price down, enabling the government to buy a controlling stake at a cheaper price. Argentina would then sign service and production contracts with other companies to develop its vast reserves as rapidly as possible, alleviating the specter of further fiscal strain. If it includes negotiating higher oil and gas prices, such an approach could bring companies to invest the billions of dollars necessary to turn around Argentina's current energy shortfalls.

However, recent estimates suggest that, even under favorable investment conditions, it would take Argentina five years to make up its natural gas deficit using shale gas. In the meantime, the country’s energy situation will continue to be bleak.

Kyle Younker is a graduate student in Georgetown University’s Public Policy program in Buenos Aires.

Jack Luft is a graduate student in Georgetown University’s Public Policy program in Buenos Aires.