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ANALYSIS: Why is there keen interest in acquiring YPF?

July 15, 2009

Two Chinese energy companies, CNOOC and CNPC, are reported to be interested in acquiring Spanish major Repsol’s Argentine subsidiary, YPF. CNOOC is reportedly seeking 25% and CNPC 75% ownership of YPF for ab about $14.5 billion.

A few facts:

1) It has been known for about 2 years that these Chinese companies have been intersted in acquiring YPF;

2) Taking into account strong state intervention in Argentina’s energy markets after the economic emergency law of January 2002, why would any sane company want to invest in the country today?

3) Any company that acquires YPF will be obliged to invest billions of dollars in long-term upstream projects to halt the fall in oil and gas reserves.

The unfortunate truth about Argentina is that most companies that established themselves in the country in the 1990s would leave if they could. Repsol is one of these but it has not found a suitor for YPF that it willing to pay an adequate price for the subsidiary.

Repsol President Antonio Brufau announced in 2006 that the company is ready to relinquish under 50% ownership of YPF. In February 2008, it sold 14.9% of its Argentine subsidiary to banker-businessman Enrique Eskenazi for $2.235 billion.

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