17 Apr 2012

Repsol ‘demands $10bn compensation’ from Argentina

Spanish oil giant Repsol has demanded $10bn in compensation from Argentina if it goes ahead with plans to nationalise YPF.

Argentina wants YPF, its biggest oil company, to be taken back into state hands, ousting the Spanish group Repsol, which has a 57 per cent stake, as majority shareholder. The move prompted a sharp fall in the Spanish oil group’s shares.

Cristina Fernandez, the Argentine president, announced live on state television that she had sent a bill to parliament seeking a 51 per cent stake in YPF.

Rejecting recent criticism from Spain, Ms Fernandez said: “I am a head of state and not a hoodlum.”

Spain retaliated on Tuesday by summoning the Argentine ambassador in an escalation of tensions between the two countries.

According to AFP, Repsol will seek compensation of at least $10bn (£6.3bn).

Earlier, Spanish foreign minister Jose Manuel Garcia-Margallo said the “climate of friendship” between the two countries had been broken.

He said: “This has broken the climate of friendship that existed between Spain and Argentina. Spain had worked with Argentina during its hardest hours.”

Spanish Prime Minister, Mariano Rajoy is due to visit Mexico and Colombia, where he is expected to seek support for Madrid’s position.

The Spanish industry minister, Jose Manuel Soria, said Spain would take “all measures it considers appropriate” to defend the interests of Repsol and Spanish businesses abroad.

The YPF plan would be the biggest renationalisation in the natural resources industry since the Russian government took control of Yukos in the early 2000s.

The 51 per cent of YPF has a market value of around $5bn, according to estimates.

This has broken the climate of friendship that existed between Spain and Argentina – Jose Manuel Garcia-Margallo Spanish foreign minister

Argentina has sharply criticised Repsol, claiming it has been “emptying” YPF.

YPF’s gas reserves fell more than 6 per cent in 2011, to end the year at 2.36 trillion cubic feet.

Domestic production shortfalls have forced the government to increase imports of liquefied natural gas (LNG) in the winter to meet demand for the fuel. Increased demand from Japan in the wake of the 2011 earthquake and tsunami has pushed up prices.

But analysts and industry executives said the real culprit for Argentina’s loss of energy self-sufficiency was its failed energy policy, which set domestic fuel prices at well below international levels, in a bid to control inflation.

Argentina also has large shale gas reserves, but needs between $5bn and $8bn a year to develop them and extract the gas.

The latest row over oil follows in the footsteps of the long-running dispute between Argentina and Britain over the Falkland Islands, which led to war in 1982.

Earlier this month, Argentina was widely seen as sabre-rattling over the Falklands, which it claims as its own territory, as five separate oil firms seek ‘liquid gold’ in the islands.

Argentina’s embassy in London sent a two-page letter to up to 15 banks, thought to include Royal Bank of Scotland and Goldman Sachs, raising the threat of civil and criminal action if they continue working with the five London-listed companies.

However, none of the firms has yet to strike oil in the Falklands.

According to some UK oil analysts, the Falklands could generate $180bn (£115bn) in royalties and tax from oil.


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