One of the most arresting developments in the global energy sector was Argentina's move last week to seize control of the YPF division of Spanish oil and gas company Repsol. Argentina says it is making the move-which would take control of 51 per cent of YPF, leaving Repsol with a six per cent stake-because Repsol has not invested enough in the country's oil industry. Support in Argentina for seizing the formerly state-owned YPF runs so deep that even former President Carlos Menem says he's in favour of its expropriation from Repsol. Menem, now 81 and a senator, said he will vote for the re-nationalisation next week, even though he knows many will criticise him. As president from 1989-1999, Menem sold off many state enterprises in a privatisation wave. But he says Repsol took all its profits out of the country and failed to invest anything in Argentina. Repsol YPF SA and Spain have slammed Argentina's re-nationalisation of YPF as outright "pillaging" and an attack on their interests. The company's chief executive, Antonio Brufau, told reporters on April 18 that YPF is worth US$18.3 billion, and he valued Repsol's stake at US$10.5 billion.
The European Union's stance
On April 20, the European Union parliament condemned Argentina's move and demanded that the EU take action against Buenos Aires at the World Trade Organisation. The parliament also called on the EU to look at the "possible partial suspension of the unilateral tariff preferences" as a way of punishing any country that attempts to nationalise a European company's assets.On April 20, Spain retaliated with a measure that could curtail multimillion-dollar imports of biodiesel from the Latin American nation. The Spanish industry ministry will approve a biodiesel plan, Deputy Prime Minister Soraya Saenz de Santamaria said after a weekly cabinet meeting.
She gave no details, but one possibility would be a measure giving preference to EU-produced biofuel in meeting compulsory motor fuel blending requirements. Spain's biodiesel industry has lobbied for years for such a rule. Industry sources estimate that Spain imported 720,000 tonnes of biofuel from Argentina in 2011, worth US$990.6 million. Spanish biofuel plants are running at an estimated 14 per cent of capacity. "The goal is to encourage the use of biodiesel of EU origin," an industry ministry source said. In all, 74 per cent of biodiesel used in Spain is imported, and 90 per cent of that comes from Argentina and Indonesia. Spain's threatened "consequences" for Argentina since it decided to expropriate 51 per cent of YPF from Madrid-listed Repsol. But tough action is difficult against a country that has been shut out of world debt markets and has ignored international fines in previous disputes.
Argentine President Cristina Fernandez said last Friday that her country could use more biodiesel itself if Spain cuts imports.
"We are in a position to absorb that production," Fernandez said, adding that her government would not complain to the World Trade Organisation if Spain reduced its purchases. Spain bought two-thirds of Argentina's biodiesel exports between January and March of this year, according to the private Argentine Biofuels Chamber (Carbio). "The exclusion of Argentina would have direct, negative effects on production and sales," said Gustavo Idigoras, an Argentine biofuels analyst. "The country would have to make a bigger effort if it lost the Spanish market." AP
Argentina: A leading Latin American economy
Argentina is the world's leading supplier of soyoil and soy-based biodiesel. More than 12 million tonnes of Argentine soybeans were used last year to make biodiesel, compared with total output of some 49 million tonnes in the 2010/11 season. Argentina's decision to seize control of YPF has angered key trade partners who were already losing patience with protectionist measures by Latin America's number three economy. Karel De Gucht, the EU's trade commissioner, wrote to Argentina to express the bloc's "serious concerns about the overall business and investment climate in Argentina,"singling out the YPF takeover and import curbs for criticism. "You are certainly aware of the very serious legal considerations these measures raised from a World Trade Organisation perspective," he said in an April 19 letter distributed by the EU at a G20 meeting in Washington, DC. "The EU keeps open all possible options to address this matter," the letter read. Earlier, the European Parliament urged the commission to consider reprisals such as the suspension of trade benefits, mirroring a recent decision by Washington.
United States President Barack Obama decided last month to suspend Argentina from the US Generalised System of Preferences (GSP) programme, which waives import duties on thousands of goods from developing countries, after it failed to pay compensation awards in two disputes involving American investors.Argentina has said it will not pay Repsol the full amount the Spanish company wants for its stake in YPF, which has been under intense pressure from Fernandez's centre-left government to increase production. Repsol has said YPF is worth US$18 billion as a whole and that it would seek compensation on that basis. According to Reuters data, YPF's market capitalisation as of Friday was US$7.3 billion. One member of the European Parliament, conservative Martin Callahan from Britain, called on EU foreign ministers to launch a joint initiative to expel Argentina from the G20. "Hard-hitting words from the EU are only playing to President (Fernandez's) nationalist agenda, bolstering her position against the West," Callahan said in a letter to EU high representative Catherine Ashton on Friday. Argentine Economy Minister Hernan Lorenzino told reporters in Washington: "This issue has not been and is not being discussed at the G20." Reuters
World Bank
Argentina's move to nationalise local oil company YPF, controlled by Spain's Repsol, was strongly criticised by the World Bank president Robert Zoellick and French Foreign Minister Alain Juppé. Zoellick warns countries under economic pressure are responding with populism and protectionism Zoellick warns countries under economic pressure are responding with populism and protectionism. "It is mistake and the wrong thing to do" Zoellick told a news conference on Thursday at the opening of World Bank and International Monetary Fund meetings of Finance chiefs in Washington. "I think it is a symptom we have to watch out for under economic pressure whether countries will move ... respond more to populism, respond more to protectionism," he said. "I think it was the wrong thing to do," the World Bank head added. Meanwhille, from Paris, Foreign Minister Juppé reiterated the European block position and joined the region's outcry against what European officials have been considering a gross "breach of the international law." "Like in all matters, the international frame of law should be respected. You cannot expropriate without a previous and proper compensation," the official pointed out. The Foreign Minster also offered some comradeship towards the Spanish government by saying "France's understands our partner Spain concerns and call for European solidarity." Mercopress
Repsol YPF in T&T
Upstream
• Repsol has the mining rights to 7 offshore exploration blocks
• Area: 2,363 km2
• It is one of the largest private companies in T&T
• It operates an extensive oil producing area off T&T
LNG
• Repsol is part of the integrated LNG project in T&T.
• In conjunction with bpTT and BG T&T, among other companies, it is involved in Atlantic's liquefaction plant, which has four LNG trains in operation with a total annual capacity of 15 million tonnes.A year ago, Luis Polo, Repsol YPF's Trinidad business unit director, said the company intended to invest US $600 million in 2011 in the Caribbean region with substantial exploration and development projects.Polo also stated that the company would spend one-third of that amount- US $200 million-in T&T.
He said about US $60 million would be spent on work overs and additional exploration at the Teak, Samaan and Poui fields, which were estimated to contain 25 million barrels of crude oil reserves.