BUENOS AIRES -- Blaming a lack of investment in domestic energy production for a spike in oil and gas imports, Argentina President Cristina Fernandez de Kirchner sent a proposal to congress Thursday to nationalize a majority interest in YPF, the country’s largest oil company.
If approved, the government would acquire a 50.1% interest in the company, whose majority owner is Spain-based Repsol. News of the proposal sent YPF share prices soaring 8.6% in New York Stock Exchange trading, as investors positioned themselves for the government’s possible purchase of shares.
Fernandez has ramped up her criticism of the oil industry in recent weeks, blaming it for a doubling of energy imports last year and a reversal of the country’s once sizable energy surplus.
But industry analysts point to Fernandez’s populist fuel price controls and consumer subsidies as reasons for the production decline. By forcing producers to charge customers less than market prices for gasoline, diesel and gas, she makes them loath to spend millions of dollars in drilling for new reservoirs, analysts said.
In a recent interview with the Times, energy consultant Daniel Gerold of Buenos Aires said Argentina's price controls thus feed a “vicious cycle” of decreasing domestic supplies and rising imports, cutting Argentina’s trade surplus.
The issue has become a political football. Local politicians in several states who support Fernandez have revoked about a dozen of YPF’s exploration permits in the last month. Meanwhile, YPF this week promised to invest $4.4 billion over the next five years in several projects in Santa Cruz state.
Fernandez on Thursday met with member governors of the Federal Organization of Hydrocarbon Producing States and was expected to address the nation about nationalization.
Opposition senator Maria Eugenia Estenssoro criticized the proposal as the “third rape of YPF in 12 years,” referring to formerly state-owned YPF’s privatization in 1999, and the 2008 sale of a large stake in the energy company to a close ally of the president “who didn’t put up any money.”
Many of Latin America’s former state-owned oil companies have undergone partial privatization in recent years, a hybrid policy that has enabled former monopolies such as Petrobras of Brazil and Ecopetrol of Colombia to expand production and profits.
Conversely, tighter state control at Venezuela’s state-owned petroleum company PDVSA since massive strikes in 2002 and 2003 prompted President Hugo Chavez to fire 20,000 workers there has led to a sharp decrease in crude output and efficiency.
-- Special correspondents Andres D'Alessandro in Buenos Aires and Chris Kraul in Bogota, Colombia.
Photo: Argentina President Cristina Fernandez de Kirchner arrives for an event at the government house in Buenos Aires on Thursday, April 12, 2012. Credit: Eduardo Di Baia /Associated Press