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Argentine Cabinet Chief says Repsol deal will open country to energy investment

DANIEL CANCEL

BUENOS AIRES, Argentina (Bloomberg) -- Argentine Cabinet Chief Jorge Capitanich said an agreement to pay Repsol $5 bn in compensation for the expropriation of its controlling stake in YPF will open the door for increased energy investment.

The proposed compensation plan, which was already approved by the Senate and is being voted on April 23, 2014, by the lower house, would provide Repsol with $5 bn worth of government bonds and end international lawsuits over the 2012 takeover of YPF.

“The bill will be converted into law today,” Capitanich told a room full of business leaders during an hour-long speech at the Alvear hotel in Buenos Aires including Pan American Energy board member Alejandro Bulgheroni. “It’s a very important step to have capital market access and multiply our efforts to explore for and develop oil and gas to achieve self-sufficiency.”

Argentina posted a record $6.1 bn energy deficit previous year as output at mature wells declines and demand surges amid subsidized rates for consumers. YPF, which is now 51% owned by the government and run by former Schlumberger executive Miguel Galuccio, has partnered with Chevron to develop shale deposits of Vaca Muerta in western Argentina.

President Cristina Fernandez de Kirchner seized Repsol’s controlling stake in YPF in April 2012 for allegedly failing to invest sufficiently in production. Repsol initially sought as much as $10.5 bn in compensation and filed lawsuits in courts around the world including the World Bank’s arbitration tribunal.

The government will need a total of about $149 bn of investment for infrastructure projects over the next decade, Capitanich said, adding that multilateral lenders will provide about $5 bn a year.

Fernandez’s government has taken steps to regain access to the international capital markets in order to finance development projects while lowering Argentina’s debt level, Capitanich said. The biggest challenges for the nation remain resolving its energy deficit, continuing with the industrialization of the country and boosting exports, he said.

YPF sold $1 bn of bonds due 2024 this year at 8.75%, the largest bond sale ever for an Argentine company. YPF plans to invest about $5 bn this year, Galuccio said previous month.

Malaysia’s Petroliam Nasional signed a memorandum of understanding with YPF in February and companies from Shell to Petrobras have pledged shale investments this year.

YPF, said first-quarter gas output rose 10% from a year earlier while oil production rose 7.8%. Output at the state-run producer has risen five consecutive quarters, the company said.

“We think the energy issue is the key for sustainable growth in Argentina,” Capitanich said.

04/24/2014

 

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