Argentina’s move to take control of YPF could jeopardize foreign investment – by Shawn McCarthy (Globe and Mail – April 17, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

OTTAWA — Argentina is planning to nationalize control of the country’s largest oil company, a move that could discourage foreign investors in one of the world’s hottest emerging oil and gas plays.
President Cristina Fernandez on Monday sent a bill to the country’s Congress to expropriate 51 per cent of the shares of YPF, the Argentine subsidiary of Spain’s Repsol, complaining the company is failing to meet its investment obligations in the country.

The move has heightened concern among investors in companies exploring for oil and gas in the country – including several Canadian plays.
In addition to U.S. giants such as Exxon Mobil Corp. and Apache Corp., (APA-N94.552.282.47%) Calgary-based companies that have properties in the South American country include Americas Petrogas Inc., (BOE-X2.38-0.46-16.20%) Gran Tierra Energy Inc., (GTE-T6.24-0.05-0.79%) and ArPetrol Ltd. (RPT-X0.05-0.005-9.09%)
“The issue that scares investors is not knowing how far the government participation will go, if it’s only YPF or if it is going to include other petroleum companies in Argentina,” said Joe Amador, Latin America director for Scotia Waterous, the Bank of Nova Scotia’s oil and gas arm in Houston.
Ms. Fernandez has also seized a $24-billion (U.S.) pension fund and airline Aerolineas Argentinas SA since taking office in 2007.
The Argentine government had been threatening to expropriate YPF shares for weeks, and Monday’s move sparked angry reactions from the government in Spain and the European Union.
Executives at several Canadian-based companies active in the South American country, however, are unfazed by the aggressive state intervention, and said Monday they’re confident their investments are secure.
Argentina is enjoying an investment boom as it has tremendous shale gas and tight oil formations, similar to the unconventional resources that have reversed declining production in North America.
YPF was an Argentine company until it was taken over by Repsol in 1999, creating the largest privately owned energy company in Spain and Latin America.
It represents 42 per cent of Repsol’s total reserves, estimated at 2.1-billion barrels of oil equivalent.
Analysts say the latest government move could set back Argentina’s efforts to reduce its growing reliance on imported oil and gas because the country needs foreign investment to develop its tough-to-extract resources.
“They are going to be closing the country as an investment destination,” said Anish Kapadia, an analyst at Tudor Pickering Holt & Co. in London.
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