Argentine shale provinces said to unite against YPF license push
BUENOS AIRES (Bloomberg) -- The three provinces holding Argentina’s largest shale oil and gas deposits will jointly challenge a push by federally owned YPF SA to take control of the auction and renewal of licenses, three officials said.
Jorge Sapag, Francisco Perez and Martin Buzzi -- governors of Neuquen, Mendoza and Chubut, respectively -- met in Buenos Aires on May 13 and agreed to impel their congressional representatives to oppose any move to federalize licensing processes, the provincial officials briefed on the matter said. They asked not to be identified because the talks were private.
The three governors weren’t available to comment, their assistants said by telephone. Alejandro Di Lazzaro, a YPF spokesman in Buenos Aires, declined to comment.
The fight underscores political tensions derived from unclear rules governing Argentina’s nascent shale boom. For prospective license holders, a single federal system would remove the need to negotiate with two levels of government.
In 2004, then-President Nestor Kirchner enacted a law allowing provinces rather than federal authorities to auction oil leases to give them more control and a bigger share of their natural resources. Now YPF, which President Cristina Fernandez de Kirchner expropriated from Spain’s Repsol SA in 2012, is seeking a federal licensing system in which provinces retain ownership of oil areas, two of the people said.
Vaca Muerta, a Belgium-sized layer of underground rock in southern Argentina, contains the world’s fourth-biggest shale oil reserves, behind Russia, the U.S., and China, and the second-largest gas reserves after the U.S.
YPF owns about 37% of Vaca Muerta concession areas, most of which are coming up for renewal in the next few years. President Fernandez has invited foreign companies including Chevron Corp. to help YPF’s shale exploration efforts and last year issued a decree enabling a YPF-Chevron venture to obtain rights to 3% of Vaca Muerta until 2048, which was passed by Neuquen’s legislature.
YPF CEO Miguel Galuccio in May opposed a Houston roadshow organized by Neuquen province as a preliminary step to auction shale areas through its provincial oil company, Gas & Petroleo del Neuquen, the officials said.
Galuccio wants the federal government or Buenos Aires-based YPF to handle the auctions, they said. Galuccio, who is attending a conference in Bolivia, wasn’t available to comment, an assistant said by telephone.
The dispute between YPF’s CEO and the provinces has been hurting the company’s American depositary receipts this week, said Carlos Aszpis, an equity strategist at Schweber & Cia. Sociedad de Bolsa SA.
“Not having a clear horizon for the licenses is a problem for YPF,” Aszpis said in a telephone interview from Buenos Aires. “We will only see the company shares rallying once this dispute is over.”
The company’s ADRs slid 1.7% to $29.25 at 11:11 a.m. in New York, after earlier falling as much as 3.6% to $29.08, the lowest since May 6. The ADRs have dropped 4.7% this week.