President
Cristina Fernández de Kirchner
Cristina Elisabet Fernández de Kirchner (; born 19 February 1953), often referred to by her initials CFK, is an Argentine lawyer and politician who has served as the Vice President of Argentina since 2019. She also served as the President ...
of
Argentina
Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country in the southern half of South America. Argentina covers an area of , making it the second-largest country in South America after Brazil, t ...
introduced a bill on April 16, 2012 for the partial
renationalization of
YPF, the nation's largest energy firm. The state would purchase a 51% share, with the national government controlling 51% of this package and ten provincial governments receiving the remaining 49%.
The bill was overwhelmingly approved by both houses of
Congress, and was signed by the president on May 5.
The government of Argentina eventually agreed to pay US$5 billion in compensation to
Repsol
Repsol S.A.
El Nuevo Herald, 2012-05-31[Originally an init ...]
, which had previously owned YPF.
[
]
Background
YPF was founded in 1922 as the first oil company in the world to be established as a state enterprise. The company grew to become largest in its sector in Argentina, and despite the divestiture of a sizable percentage of its extractive, refining, logistic, and retail infrastructure during its 1993 privatization, YPF in 2012 operated 52% of the nation's refinery capacity and accounted for 57% of the national market in gasoline and other motor fuels. Its share of petroleum and natural gas production nationally was 34% and 23%, respectively, in 2011;[ company revenues that year were US$13.7 billion.]
The firm was privatized in 1993 on the initiative of President Carlos Menem
Carlos Saúl Menem (2 July 1930 – 14 February 2021) was an Argentine lawyer and politician who served as the President of Argentina from 1989 to 1999. Ideologically, he identified as a Peronist and supported economically liberal policies. ...
and Economy Minister Domingo Cavallo
Domingo Felipe Cavallo (born July 21, 1946) is an Argentine economist and politician. Between 1991 and 1996 he was Economic Ministry of Argentina during Carlos Menem presidency. He is known for implementing the '' Convertibility plan'', which e ...
pursuant to the State Reform Law of 1989, which authorized the president to present bills to Congress for the privatization
Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
of any of the numerous state enterprises in operation at the time. Madrid
Madrid ( , ) is the capital and most populous city of Spain. The city has almost 3.4 million inhabitants and a metropolitan area population of approximately 6.7 million. It is the second-largest city in the European Union (EU), an ...
-based Repsol
Repsol S.A.
El Nuevo Herald, 2012-05-31[Originally an init ...]
acquired a majority stake in 1999. Oil and gas production subsequently weakened while demand increased, and in 2011 Argentina recorded the first energy trade deficit since 1987 and it's still in deficit in 2022.[
]
Renationalization
Investment in exploration
Exploration refers to the historical practice of discovering remote lands. It is studied by geographers and historians.
Two major eras of exploration occurred in human history: one of convergence, and one of divergence. The first, covering most ...
at YPF as a percentage of profits had been far below those in most other Repsol subsidiaries, and fell from 30 new wells in 1998 to eight in 2010 (French energy firm Total S.A. overtook YPF as the leading oil driller in Argentina). Its reserves of crude and natural gas fell 60% and 67% respectively between 1999 and 2011, and declines in output at the firm represented 54% of the nation's lost oil production and 97% in the case of natural gas.
Repsol and some market analysts blamed the decline in exploration and production on government controls on exports and prospecting leases, and price controls on domestic oil and gas. YPF, however, remained profitable throughout Repsol's tenure even as output fell, and net income from 1999 to 2011 at YPF totaled nearly US$16.5 billion.
The Kirchner administration in turn pointed to high dividend yield
The dividend yield or dividend–price ratio of a share is the dividend per share, divided by the price per share. It is also a company's total annual dividend payments divided by its market capitalization, assuming the number of shares is constant ...
s and low investment levels at YPF in relation to profits.[ Argentine Economy Minister Hernán Lorenzino claimed that ]asset stripping
Asset stripping is a term used to refer to the practice of selling off a company's assets in order to improve returns for equity investors. In many cases where the term is used, a financial investor, referred to as a ' corporate raider', takes con ...
at YPF had financed Repsol's expansion in other parts of the world, while Repsol officials denied charges of underinvestment in its YPF operations and instead cited the Vaca Muerta discovery as a motivation for the takeover.[
'' Vaca Muerta'', a 30,000 km² (11,600 mi²) unconventional oil field with proven recoverable reserves of up to 927 million barrels, had been discovered by RepsolYPF in November 2011.] Repsol executives declared however that government policies would have to change in order to allow investment in new production.[ Following bills signed by governors in six fossil-fuel producing provinces during March and April 2012 revoking YPF leases accounting for over a fifth of its production, the president announced on April 16 that the Argentine Government would acquire a majority stake in YPF.][ Repsol YPF Gas, a ]liquefied natural gas
Liquefied natural gas (LNG) is natural gas (predominantly methane, CH4, with some mixture of ethane, C2H6) that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport. It takes up about 1/600th the v ...
subsidiary in which Repsol had an 85% stake, was concurrently nationalized on April 19.
The Chinese state oil concern, Sinopec
China Petroleum & Chemical Corporation (中国石油化工股份有限公司) or Sinopec (), is a Chinese oil and Natural gas, gas enterprise based in Beijing. It is listed in Hong Kong Stock Exchange, Hong Kong and also trades in Shanghai ...
, was reported to have been in talks to buy out Repsol's share in YPF – a potential deal scuttled by the Argentine announcement.
Resulting dispute
Repsol officials maintained that, per company statutes, the acquisition by any one party of stock held by Repsol equaling a 15% stake or more would trigger a mandatory purchase of Repsol's entire 57% stake (rather than the 51% sought). Repsol officials calculated compensation by multiplying the highest price earnings ratio reached by YPF in the prior two years by its earnings per share in 2011, and arrived at US$10.5 billion for a 57% stake. Argentine Deputy Economy Minister Axel Kicillof rejected these demands, however, citing debts of nearly US$9 billion. The book value of YPF was US$4.4 billion at the end of 2011;[ its total market capitalization on the day of the announcement was US$10.4 billion.] Repsol claimed that the Argentine Government drove down YPF shares ahead of the announcement (market price of the shares declined by over half from February to April),[ and chairman Antoni Brufau estimated the company's potential loss at €5.7 billion (US$7.5 billion).]
Repsol retaliated by canceling nine shipments of liquefied natural gas
Liquefied natural gas (LNG) is natural gas (predominantly methane, CH4, with some mixture of ethane, C2H6) that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport. It takes up about 1/600th the v ...
to Argentine state energy distributor Enarsa, claiming the government breached contracts following the seizure of YPF. Repsol filed a lawsuit at the World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
’s International Center for Settlement of Investment Disputes on May 15. The Government of Spain petitioned the European Commissioner for Trade
The European Commissioner for Trade (sometimes referred to as the ''EU Trade Commissioner'') is the member of the European Commission responsible for the European Union's common commercial policy.
Responsibilities
The Commissioner heads up the ...
for sanctions
A sanction may be either a permission or a restriction, depending upon context, as the word is an auto-antonym.
Examples of sanctions include:
Government and law
* Sanctions (law), penalties imposed by courts
* Economic sanctions, typically a b ...
against Argentine exports. The Spanish Government did unilaterally curtail biodiesel
Biodiesel is a form of diesel fuel derived from plants or animals and consisting of long-chain fatty acid esters. It is typically made by chemically reacting lipids such as animal fat ( tallow), soybean oil, or some other vegetable oil ...
purchases from Argentina (its main provider), as well as from Indonesia
Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guine ...
. Following a complaint filed at the World Trade Organization
The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation
in the United Nations System, governments use the organization to establish, revise, and ...
by the Argentine Government as well as higher costs for biodiesel distributors in Spain itself however, boycotts of both Argentine and Indonesian biodiesel were lifted by January 2013.
An audit of Repsol documents conducted by Kicillof and Planning Minister Julio de Vido
Julio Miguel de Vido (born December 26, 1949) is an Argentine politician who was Minister of Planning and Public Investment between 2003 and 2015.
Biography
De Vido was born in the City of Buenos Aires in 1949. Enrolling at the University of Bu ...
in May uncovered what Kicillof described as a "debasement of the company and a policy of creating shortages that would raise domestic prices to those prevailing internationally;" these findings were published on June 1 in the Mosconi Report. The Government of the Province of Santa Cruz published the results of an investigation of 13,000 inactive YPF oil wells on May 14, finding that 8,000 of these leaked and that at least US$3.5 billion of environmental damage
Environmental degradation is the deterioration of the environment through depletion of resources such as quality of air, water and soil; the destruction of ecosystems; habitat destruction; the extinction of wildlife; and pollution. It is define ...
had been caused by these; an environmental law enacted by the province in 2010 mandated the inventory and maintenance of all such wells. Other claims, including environmental damage in five other provinces, a tax debt in Chubut Province
Chubut ( es, Provincia del Chubut, ; cy, Talaith Chubut) is a province in southern Argentina, situated between the 42nd parallel south (the border with Río Negro Province), the 46th parallel south (bordering Santa Cruz Province), the Andes ran ...
, and a judicial injunction issued against Repsol over their illegal sale in 2011 of 45 million shares belonging to an employees' severance fund, raised their potential liability to US$15 billion.
An agreement was reached with Repsol on November 27, 2013, whereby the latter would be compensated for a 51% stake in YPF with approximately US$5 billion in 10-year corporate bonds. Repsol sold its remaining 12% stake to Morgan Stanley
Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the f ...
the following May.
The Petersen Group
The largest minority shareholder, the Petersen Group, held a 25% stake at the time of the renationalization, and had financed their initial purchase of 15% of the stock in 2007 with a vendor's loan from Repsol for €1.5 billion.[ The chairman and majority owner of the Petersen Group, Enrique Eskenazi, was close to President Néstor Kirchner, who supported Eskenazi's bid to become YPF's principal Argentine stockholder. Eskenazi benefited from a dividend distribution rate at YPF of 90%, which allowed the Group to repay its vendor's loan in installments. The 2008 agreement required Repsol to buy back shares owned by the Group and to assume the loan should the Madrid-based firm lose majority control of YPF.][ Sebastián Eskenazi, the son of the Petersen Group chairman and CEO of YPF until April 16, indicated however that the group would forego this option. The Group defaulted in May on a Credit Suisse loan taken in 2011 to raise its stake in YPF from 15% to 25%. Officials at Credit Suisse and at other creditors involved, including Banco Itaú, ]BNP Paribas
BNP Paribas is a French international banking group, founded in 2000 from the merger between Banque Nationale de Paris (BNP, "National Bank of Paris") and Paribas, formerly known as the Banque de Paris et des Pays-Bas. The full name of the gro ...
, and Goldman Sachs, announced on May 11 that the Group's shares would be repossessed as collateral
Collateral may refer to:
Business and finance
* Collateral (finance), a borrower's pledge of specific property to a lender, to secure repayment of a loan
* Marketing collateral, in marketing and sales
Arts, entertainment, and media
* ''Collate ...
. Repsol, as another of the Group's creditors affected by their default, also repossessed a block of shares, thus increasing their stake in YPF to 12%; following a steep rally in YPF shares, Repsol sold its stake a year later.[
]
Procedural and company developments
The Argentine Senate
The Honorable Senate of the Argentine Nation ( es, Honorable Senado de la Nación Argentina) is the upper house of the National Congress of Argentina.
Overview
The National Senate was established by the Argentine Confederation on July 29, 18 ...
approved the takeover on April 26 with 63 votes in favor of the measure, three opposing it and four abstentions.[ The ]Chamber of Deputies
The chamber of deputies is the lower house in many bicameral legislatures and the sole house in some unicameral legislatures.
Description
Historically, French Chamber of Deputies was the lower house of the French Parliament during the Bourbon ...
approved the bill on May 4 with 208 votes out of 257, and the president signed the renationalization into law on May 5.[ ]Miguel Galluccio
Miguel Matías Galuccio (born April 23, 1968) is an Argentine petroleum engineer and executive. He was appointed CEO of the state energy firm YPF upon its renationalization on May 5, 2012. He is also the CEO of Vista Oil and Gas.
Biography
Galuc ...
, an Argentine petroleum engineer with experience at both YPF and at oilfield services leader Schlumberger
Schlumberger Limited (), doing business as SLB, is an oilfield services company. Schlumberger has four principal executive offices located in Paris, Houston, London, and The Hague.
Schlumberger is the world's largest offshore drilling comp ...
as president of its production management division in London, was appointed CEO.
Galluccio presented an investment program on June 5, 2012, to increase oil exploration by tenfold and gas exploration by twenty-fold, with the goal of raising production of oil and gas by 6% annually and of refined fuel by over 7% annually over five years. The US$39 billion plan would be largely self-financed, as well as by investments from Chevron Corporation
Chevron Corporation is an American multinational energy corporation. The second-largest direct descendant of Standard Oil, and originally known as the Standard Oil Company of California (shortened to Socal or CalSo), it is headquartered in Sa ...
and the periodic issuance of high-yield, 8.75% corporate bonds. These bond issuances were raised to US$1.5 billion per series in April 2015, as demand surged to US$4 billion.
YPF acquired a controlling stake in Metrogas (the nation's largest gas distributor) in November. YPF stock rose by 190% from its post-nationalization depths in mid-2012 to the announcement of a compensation agreement with Repsol in November 2013.[ Production declines of 6% annually under Repsol were likewise reversed. Overall output rose by 3% in 2013, and a further 8.7% in oil and 12.5% in gas during 2014. Output increased a further 3% in 2015.
Development prospects for the ''Vaca Muerta'' field, which by 2014 was estimated to contain at least 23 billion barrels of oil,] attracted numerous joint exploratory ventures in subsequent years. The most significant such joint ventures include those signed with Chevron, Dow Chemical
The Dow Chemical Company, officially Dow Inc., is an American multinational corporation, multinational chemical corporation headquartered in Midland, Michigan, United States. The company is among the three List of largest chemical producers, larges ...
, and Petronas
Petroliam Nasional Berhad (National Petroleum Limited), commonly known as Petronas, is a Malaysian petroleum, oil and natural gas, gas company. Established in 1974 and wholly owned by the Government of Malaysia, the corporation is vested w ...
.[ The Vaca Muerta block operated jointly with Chevron produced 35,000 m³ daily by 2014.][
Miguel Galuccio announced his resignation as CEO, effective April 30, 2016.]
See also
* Pink tide
References
{{CFK
2012 in Argentina
Energy in Argentina
Nationalization
Presidency of Cristina Fernández de Kirchner
YPF