Daily Archives: April 14, 2012
April 14, 2012 10:27 pm by Jude Webber
Any hostile moves on YPF, the Spanish-controlled oil company, by the pro-nationalisation government in Buenos Aires could have implications that go way beyond the companies and investors at the heart of this bitter tug-of-war.
Why? Because Argentina is sitting on what geologists and energy experts widely agree is one of the world’s most attractive reserves of unconventional gas and oil – known as shale – which are trapped deep in the bedrock below ground.
Shale is potentially a very big deal indeed. It turned the US from energy importer to exporter – something that Argentina, which spent $9bn importing fuel last year, ought to take note of.
Argentina has about a third of the US shale reserves, but they are less deep (which makes them cheaper and easier to access), seams are two to three times thicker than in the US and, for now at least, Argentine shale is concentrated in the Vaca Muerta (Dead Cow) formation, rather than being spread out across the country.
So all other things being equal, shale producers should be brushing up their Spanish and heading south. Several big players – including ExxonMobil, Total and Apache – and smaller companies already have. But it is YPF which has the biggest acreage, and it estimates that as much as $250bn will be needed to develop a viable shale industry over the next decade.
No one’s pockets are that deep, so partnerships are the way to go. Except that regulatory concerns are raising red flags before investors’ eyes now.
YPF has been publicly criticised, stripped of a string of concessions after being accused of underinvestment and now the government is analysing how to give the Argentine state a bigger role in the company – something that, according to some proposals circulating in the government, could translate into the expropriation of as much as 50.01 per cent of the company.YPF is currently controlled by Repsol of Spain, which has 57.43 per cent, and 25.46 per cent is in the hands of the Eskenazi family’s Petersen Group. Just over 17 per cent is traded on stock markets.
So enthusiasm among potential new players in the shale sector – where some were prepared to invest as much as $10,000 to $12,000 per hectare, according to industry sources – is screeching to a halt. “This is damaging shale (prospects), of course,” Alieto Guadagni, a former energy secretary, told beyondbrics.
The government has been berating YPF for what it perceives as a failure to invest enough, yet the concerns its nationalization dream are raising risks reducing investor appetite – which is perverse. And if concerns over contracts were not enough to dampen investors’ spirits, the prospect of partnering with a state that likes fast results and dislikes repatriation of dividends may give pause for thought.
What is worse is that the shale prospects represent energy that Argentina badly needs. Underinvestment in the sector, analysts and industry players say, is the direct result of a regulatory regime that keeps prices in Argentina well below the international market.
As Guadagni put it, Argentina pays domestic gas producers some $2.8 per million British Thermal Units, yet shells out some $11 per million BTU for gas from Bolivia (produced, ironically, by Repsol YPF), and some $17 for liquefied natural gas to plug its huge energy deficit.
Meanwhile, the cost to Argentines for their domestic gas is about 50 US cents per million BTU of gas, and drivers of vehicles that run on compressed natural gas pay around $1.
“The big question is whether these plans for YPF will improve or worsen Argentina’s prospects for recovering its energy self-sufficiency,” Guadagni said.
Argentina had a $3bn energy surplus in 2006. This year, Guadagni reckons the deficit will be $6bn to $7bn, ballooning to $12bn in 2013. Argentina’s policy of cheap domestic energy to stoke demand and economic growth worked well after the country’s default of nearly $100bn in 2001. But it isn’t working now.
- Repsol YPF ups Argentine shale potential (mb50.wordpress.com)
- Spain warns Argentina over energy nationalisation (1oneday.wordpress.com)
- Argentina plots next moves in bid to control YPF (sfgate.com)
- Repsol YPF ups Argentine shale deposit potential (seattlepi.com)
- YPF Said to Lose Oil Partners as Government Cracks Down (businessweek.com)
The change of hear is most likely due to the fact that the US and its NATO allies are choosing to escalate the crisis in despite the Syria’s agreement to a UN and Arab League backed peace plan and ceasefire.
The escalation have come in through a variety of diplomatic, covert and military means.
Turkey just yesterday cited of the article 5 of the NATO treaty in calling for NATO to launch a military intervention after skirmishes broke out along the Turkey border where Turkey is providing the Syria terrorist rebel army with military bases to launch attacks across the border.
This comes as accusations fly that Turkey is being forced into ganging up against Syria.
There has been a military building of NATO navy vessels near Syria and a massive evacuation of NATO diplomatic officials.
Obama has just announced the US will supply “non-lethal” aid to the terrorist rebels to the Syria rebels which has sparked strong criticism that the US is purposefully working against the UN peace plan.
While the US supplies non-lethal aid, Al Jazeera is supplying the communication equipment, Saudi Arabia and Qatar are supplying the lethal aid and the CIA is training the rebels, and US mercenaries are fighting on the ground.