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  HOME | Main headline

Argentina Demands Petrobras Up Investment, Eyes Joint Projects
Planning Minister Julio De Vido said that Petrobras currently has an 8 percent stake in Argentina’s retail fuels market, but that share could climb to 15 percent in the short term with greater investment

BRASILIA – Argentina called on Brazilian state-controlled energy giant Petrobras to boost investment and participate in joint projects in Latin America with oil firm YPF, which the Argentine government decided earlier this week to nationalize.

“We have the challenge of moving ahead with joint business deals both in Argentina and the region,” Planning Minister Julio De Vido, appointed to run YPF after Argentina announced Monday it will seize a controlling stake in the company from Spain’s Repsol, said in a press conference with Brazilian Mines and Energy Minister Edison Lobao.

“Argentina today is re-establishing the state’s presence in YPF,” De Vido said, adding that it sees Petrobras as a “role model” and wants to develop new frameworks for cooperation in Argentina but also throughout the region.

On a clearly political note, he credited the former presidents of Brazil and Argentina, Luiz Inacio Lula da Silva and the late Nestor Kirchner, as well as Venezuelan head of state Hugo Chavez, with “planting the seed” for the Union of South American Nations, or Unasur, and for a new model of Latin American integration.

That “new integration” entails a “different stage” and a new type of cooperation, which in the case of Petrobras and YPF means “the challenge of doing business together.”

He said relations between Argentina and Brazil are “very strong” and will only improve under this “new cooperation” the former is proposing following President Cristina Fernandez’s move to take a 51 percent stake in YPF.

Lobao, for his part, confirmed that De Vido has expressly requested that Petrobras boost its investment outlay in Argentina’s oil and gas sector. The Brazilian company invested $500 million in the neighboring country in 2011 and plans to spend the same amount this year.

Petrobras CEO Maria Das Graças Foster also participated in the meeting with De Vido and said her company and the Brazilian government are willing to make “all efforts necessary” to meet Argentina’s request.

She noted, however, that Petrobras’ investment capacity is “limited” due to its hefty commitments to explore and develop new fields in Brazil, especially in the massive, ultra-deep pre-salt region, a recently discovered offshore oil frontier that Brazil hopes will transform the nation into a major crude exporter.

According to De Vido, Petrobras currently has an 8 percent stake in Argentina’s retail fuels market but that share could climb to 15 percent in the short term with greater investment.

The planning minister, however, vehemently denied that Argentina is asking Petrobras to invest more to cover the void left by Repsol’s absence.

“Petrobras won’t replace anyone,” De Vido said, adding that he is seeking to convince other large global energy companies to bolster their investments in Argentina.

In that regard, he said he met Thursday with executives of France’s Total and plans to hold talks next week with representatives of U.S. oil supermajors Chevron Corp. and ExxonMobil Corp.

He also said that, since being named YPF’s administrator, he has not had “any contact” with representatives of China’s Sinopec, which, according to oil industry sources, has long coveted a controlling stake in YPF and had been in talks with Repsol to acquire its 57.4 percent interest.

De Vido also said a solution is being sought to Petrobras’ dispute with the western Argentine province of Neuquen, which stripped Petrobras’ Argentine unit, Petrobras Energia, of its license to operate in the Veta Escondida area earlier this month, alleging a lack of sufficient investment.

“There’s a small disagreement that’s on the way to being resolved,” De Vido said, noting that the final decision will depend on the provincial authorities, who are “autonomous.”

Even so, he said the federal government is actively involved in resolving the matter.

In the lead-up to the nationalization announcement, Repsol also had come under criticism by Argentine authorities for inadequate investment by YPF.

Six Argentine provinces – Santa Cruz, Mendoza, Chubut, Neuquen, Salta and Rio Negro – recently revoked YPF’s licenses to operate in more than 15 areas, while Tierra del Fuego and Formosa provinces threatened to cancel YPF’s production permits unless the company boosted investment.

Those moves were made amid a political climate in which Fernandez’s government blamed YPF for a whopping fuel-import bill last year.

Spain blasted the expropriation move and has retaliated by announcing plans to limit imports of Argentine biodiesel.

The Iberian nation said it also will pursue “measures of a diplomatic nature” in various international forums to respond to the takeover.

Repsol Chairman and CEO Antonio Brufau, for his part, said the recent discovery of massive unconventional shale gas and oil reserves in west-central Argentina, in an area known as Vaca Muerta, was undoubtedly behind the move to seize a controlling stake in YPF.
 

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