man installed at the helm of the (nationalized) company was in Brasilia talking to Petrobras, the Brazilian state oil company, to drum up new deals together.
YPF to Brazil: let’s do business
“No one in their right minds” will invest in Argentina now, after the government moved to nationalise YPF, expropriating 51 per cent of shares in the Spanish-owned company. That was the view of Felipe Calderón, Mexico’s president earlier this week.
And yet four days after Cristina Fernández, Argentina’s president, announced the YPF swoop, the man she has installed at the helm of the company was in Brasilia talking to Petrobras, the Brazilian state oil company, to drum up new deals together.
“The challenge that this new YPF and Petrobras have is to work together, in joint businesses and joint finances,” Julio De Vido, the planning minister who is in temporary charge of YPF, told a news conference in Brasilia after talks with Edison Lobão, Brazil’s energy minister, and Petrobras chief Maria das Graças Silva Foster.
Petrobras was angered earlier this month when the province of Neuquén stripped it of an operating licence. De Vido said he was confident that could be resolved – perhaps a handy carrot to tempt it into new deals.
Petrobras, which has sold out of its downstream business in Argentina will invest some $500m this year in an effort to boost production. Tellingly, though, that is no increase on last year.
With Argentina sitting on gigantic reserves of shale oil and gas that will require equally enormous investment to develop, YPF will be in need of partners. El Cronista Comercial business paper said the government was already sounding out Sinopec, Bridas (owned by CNOOC of China and the Bulgheroni family of Argentina) and Total. There was no immediate confirmation of the report.
But De Vido said he would meet Total executives on Monday to discuss boosting production in two gas fields.
The view in the industry is that however horrible the regulatory environment, if Argentina’s shale resources are too good to miss, then companies will end up developing them.
But as Martín Redrado, a former central bank chief who now works in dispute resolution at the World Trade Organisation, told beyondbrics: “There’s no such thing as a free lunch.”
“Obviously what happened after Monday is that the rate and return and risks of investing in Argentina are higher,” said Redrado.
“Oil exploration is risky by definition therefore all oil companies are used to managing risk. The issue is what is the rate of return. If it was 11 to 12 per cent, looking at the country risk rate, before Monday, now it is 6 or 7 points higher, in the region of 18 to 20 per cent. The country is losing because companies will clearly ask for more profit out of their investments,” he said. |
