Bloomberg News

YPF, Petrobras Lose Argentine Oil Incentives Amid Crackdown

February 14, 2012

(Updates with closing share price in fifth paragraph.)

Feb. 3 (Bloomberg) -- Repsol YPF SA, BP Plc and Petroleo Brasileiro SA will lose financial incentives intended to boost investment in Argentine crude exploration and production amid rising government pressure on oil companies. YPF slumped.

President Cristina Fernandez de Kirchner’s government ended the 3-year program that provided about 10 billion pesos ($2.3 billion) of incentives to oil companies after an increase in local crude prices since the measures were introduced in 2008, the Planning Ministry said in an e-mailed statement today.

Fernandez is increasing pressure on oil companies to invest more in Argentina after blaming them for a doubling of fuel imports to $9.4 billion in 2011 from a year earlier. The president in October ordered oil and mining companies to repatriate export revenue and in November voted against a dividend payment for Buenos Aires-based YPF, as it seeks to stem capital flight. The government also discussed nationalizing YPF, Pagina/12 newspaper reported Jan. 29, without saying where it got the information.

“If the government is trying to induce more companies to reinvest dollars, it makes it a little more challenging,” Murray McCartney, chief executive officer at Calgary-based oil and gas explorer Crown Point Ventures, said today in a telephone interview. “It’s counterproductive.”

YPF American depositary receipts fell 8.7 percent to $32.20 in New York. The shares dropped 19 percent during the week. A company official in Buenos Aires declined to comment.

Crude Prices

Argentina’s government caps oil exports at about $42 per barrel and keeps any profit above that price. Production declined 5.6 percent in 2011 from a decade earlier, according to the Energy Ministry’s website.

Domestic crude prices doubled to $70 a barrel from when the Petroleo Plus and Refino Plus incentive programs began, the ministry said. The government said it achieved the initial objectives of the program after some companies completed projects and expects to save 2 billion pesos a year through the suspension.

Crude oil for March delivery rose 1.5 percent to $97.84 in New York today.

Petroleo Brasileiro’s Argentine unit, BP Plc’s Pan American Energy business and YPF, majority owned by Madrid-based Repsol, are all affected by the measure, according to the statement. The Petroleo Plus program provided incentives for new oil production, while Refino Plus supported investment in refining capacity increases.

The government on Jan. 16 opened a probe into fuel price- fixing by companies including YPF, Petrobras Argentina and Royal Dutch Shell Plc after a complaint from the transport association.

Largest Discovery

Repsol made its largest discovery to date in November with a 927 million-barrel find at the Loma la Lata field in Patagonia, about six times bigger than the company had estimated in May.

While announcing the discovery from the southern province of Neuquen, YPF Chief Executive Officer Sebastian Eskenazi was flanked by Planning Minister Julio de Vido, while Fernandez also joined via teleconference. De Vido accused YPF and other oil companies of price fixing.

The Eskenazi family paid $1.3 billion to boost its stake in YPF to about 25 percent last May. Repsol controls 57 percent of YPF.

--With assistance from Silvia Martinez in Buenos Aires and Rodrigo Orihuela in Rio de Janeiro. Editors: Robin Saponar, Charles Siler

To contact the reporter on this story: Laura Price in Buenos Aires at lprice3@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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