April 18, 2012 8:28 pm
Argentina quick to make YPF changes
A day after kicking Spain’s Repsol out of YPF after accusing it of stripping profits and running the oil company into the ground, the Argentinian government said it was making operational changes that would save $70m a month and boost production by 2.5 per cent by December.
Cristina Fernández, the president, announced plans on Monday to nationalise 51 per cent of the company, Argentina’s biggest, a move that would slash Repsol’s holding to 6.4 per cent. Even before the bill reached Congress, she had installed two senior government officials at the helm of YPF by decree.
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In their first statement since taking over the day-to-day running of YPF, Julio de Vido, the planning minister, and Axel Kicillof, the deputy economy minister, said they were taking steps to “guarantee the normal functioning of the company and at the same time, laying the foundations to achieve full oil and gas production and to recover energy self-sufficiency”.
Plans to drill and maintain more wells over the next eight months would boost production by 2m barrels, some 2.5 per cent of current annual production, saving an unspecified outlay in dollars, the government administrators said.
They announced an increase of refinery operations to 93 per cent of capacity at YPF’s La Plata facility, from 85 per cent, to be achieved by “optimising production”. “In this way, the volume of fuel oil available for thermal power plants will increase by 60,000 tonnes per month, which represents a foreign currency saving of $21.1m a month,” they added.
The government will also redirect production from YPF’s El Portón field in the western province of Neuquén “which will allow us to inject an extra 2.2m cubic metres into the national system daily and save about $50m a month”.
The government is under pressure to deliver quick results after Ms Fernández laid the blame for fuel imports of $9.4bn last year squarely at Repsol’s door. She made no mention of Argentina’s energy policy and regulated price regime – which Mr De Vido has been in charge of implementing since 2003 – and which Jorge Lapeña, a former energy secretary, told senators on Tuesday was “irrational”.
The government administrators also said they would mobilise 14 drill rigs in addition to the current 8 engaged in workover activity to maintain wells. That would translate into 130 wells drilled and more than 400 repairs conducted by December than previously planned, enabling the production increase.
Mr Lapeña said he had seen nothing to suggest the government had a coherent plan for recovering Argentina’s energy self-sufficiency, but the repeated references to foreign currency savings underlined the fact that the government is scrambling for dollars.
The government has been criticised from all sides as a bitter court battle looms over how much Argentina will pay Repsol. Mr Kicillof on Tuesday ruled out the $10.5bn Repsol is demanding. Mr De Vido said environmental damage would have to be factored in as the final value is determined.
But the Eskenazi family, which owns 25.46 per cent of YPF and was brought in as a strategic Argentinian partner at the behest of the Argentinian government in 2008, also faces serious financial headaches and potential default on its loans.
It still owes $560m to the banks – Credit Suisse, Goldman Sachs, Paribas and Itaú – which part-financed its entry into the company, and has not yet paid off any of the $1bn which Repsol lent it for the deal and which, one industry source said, had an annual interest rate of 7 per cent.
The Eskenazis relied on YPF dividends to repay its debts, but the government will now put them straight back into operations.
The decision to eject Repsol and keep in the Eskenazis “is a strategy to concentrate all control in government hands”, said Emilio Apud, another former energy secretary.
The government has succeeded if its aim was to grab cash flow, make a big-impact political move that distracts from other problems, and have lots of state posts to distribute, he said. “What they have done is the exact opposite of what they should do attract capital. This moves us much further away.”
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