A possible Chinese exit for the ongoing clashes between Repsol YPF and Argentina
China National Offshore Oil Corporation, CNOOC, could prove to be the solution for the ongoing clash between the Argentine government and Spain’s Repsol which holds a majority stake in YPG, Argentina’s main oil and gas company.
According to the Spanish financial media, the giant Chinese corporation is preparing a major offer to take-over Repsol stake in YPF in a sum close to 12 billion dollars. The Chinese move does come as a surprise since CNOOC main rival Sinopec has also advanced in the region and in October 2010 took over 40% of the Spanish affiliate in Brazil with an investment of 7 billion dollars.
Furthermore CNOOC already has interests in Argentina having purchased in March 2010, 50% of Bridas, an Argentine private oil and gas complex belonging to the Bulgheroni family. CNOOC paid 3.1 billion dollars for the 50% of Bridas which has interests besides Argentina, in Chile, Uruguay and Eastern Europe.
The operation is pending an audit from a Repsol subsidiary and the final approval from the Argentine government that can still veto the deal.
According to different Spanish media sources Repsol which has as shareholders La Caixa, PEMEX and Sacyr Vallehermoso apparently have signed a non-binding agreement with China’s CNOOC for the purchase of YPF conditioned to a due diligence of the company’s assets and accounts.
Although Repsol has denied the negotiations, the company’s CEO Antonio Brufau has been holding meetings with representatives from the conglomerate. It should not come as a surprise because a few weeks ago the Madrid press said that Repsol was in contact with CNOOC, CNPC, Lukoil and Exxon to try and untangle the situation in Argentina.
Meantime Brufau who arrived in Buenos Aires on Monday is waiting to hold an interview with President Cristina Fernandez and some of her closest and most trusted aides, as he has requested.
However it is believed the Argentine strategy is for Brufau to participate on Thursday in the meeting of governors from the Hydrocarbons Producing Provinces, (OFEPHI) which brings together all the provinces with oil and gas deposits in production and who have been suspending YPF exploitation concessions: 15 areas in the provinces of Chubut, Santa Cruz, Neuquen, Rio Negro, Mendoza and Salta, which already represent over 12% of the company’s oil and gas extraction.
Likewise since the conflict with the Argentine government took off when President Cristina Fernandez said she would no longer tolerate a fuels import bill of 11 billion dollars and wanted to ensure the country’s self sufficiency, the value of the company in the Buenos Aires stock exchange plunged 27% and 34% in New York.
To make things worse the extreme south province of Santa Cruz announced on Tuesday in its portal that next Thursday it will definitively suspend YPF production concessions in three fields.
Governor Daniel Peralta and the head of the provincial Energy Institute, Juan Antonio Ferreiro said that even when the official reply from YPF for greater investments has yet to come, “we doubt YPF can present an investment road map that could overcome a situation (allegedly lack of sufficient investments) that has been ongoing for six years”