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SPOTLIGHT: Will YPF be nationalized?

June 16, 2009

There have been some rumors as of late in Argentina about the government nationalizing YPF due to growing differences between banker-businessman Enrique Eskenazi. An article published today in Buenos Aires business daily El Cronista suggests that over 50% of the company could be purchased Argentina.  Such an announcement could be made this week when Repsol YPF CEO Antonio Brufau visits Argentina.

The transfer of majority control from Repsol could happen before the June 28 presidential elections, the daily said citing sources close to the government.

Grupo Petersen, a company owned by Eskenazi, acquired 14.9% of former state-owned energy company YPF last year for $2.235 billion with an option to purchase a further 10%. Repsol has been trying since 2006 to sell up to 25% of the company to the local market as well. Poor market conditions have impeded such a spin off.

Does it make economic sense to return YPF into Argentine ownership? Even if Eskenazi is an Argentine native he represents a private company in which financial pragmatism must guide it rather than nationalism during an election year. Another question we can ask is what type of a company is Argentina purchasing after YPF was 99.9% privatized in 1999 for a hefty $15 billion?

A recent stock filing in April, shows conclusively that YPF has become an impoverished company under Repsol ownership. Argentina’s biggest oil and gas company’s proved reserves as of end-December continued their downards spiral to 3.099Tcf. That is a 16.4% fall from the previous year and a plunge of 22.8% versus 2006 (4.015Tcf).

In 2000, when Argentina’s proved gas reserves peaked at YPF’s reserves accounted for about a third of Argentina’s total. By 2007, however, Argentina’s and YPF’s reserves had plummeted by 43.16% and 55%, respectively.

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