MercoPress. South Atlantic News Agency

Argentine cabinet and governors insist energy self-sufficiency is the goal

Minister Lorenzini, “the oil is lying underground and needs to be extracted”

Argentine President Cristina Fernández met with governors members of the Federal Organization of Hydrocarbon-producing States (OFEPHI) on Thursday evening and later in a flurry of television appearances ministers said energy self sufficiency was the target.

“We analyzed the areas in which contracts have been terminated” said Jujuy Governor Eduardo Fellner as he exited the Government House and assured that these kinds of meetings will be repeated soon. He also dismissed the existence of a Government-sponsored bill seeking to nationalize oil giant YPF. “Those are just rumours,” he assured.

Meanwhile Economy Minister Hernán Lorenzino said that the oil lying underground “needs to be extracted” and the government is looking to be self-sufficient on this”.

Despite the high levels of speculation regarding the nature of the encounter, this is a meeting that was scheduled two weeks ago, in which all provinces were expected to tell Cristina Fernández their agreement on the need to finalize all concessions from oil-producing companies that have failed to invest sufficiently in the area.

Governors were also scheduled to detail what they think should be the next steps in the matter, and the measures they have already taken against both oil companies YPF and Petrobras.

The latest event refers to the Patagonian province of Santa Cruz, where Governor Daniel Peralta announced that he was taking away YPF concessions of the Los Perales-Las Mesetas, Cañadón Vasco and Pico Truncado-El Cordón areas.

It should be noted that on Wednesday YPF presented an investment proposal of 4.4 billion dollars, which would be destined to the 11 areas that the company holds in the Santa Cruz province. The offer was rejected by the province’s government, saying it was ‘six years late’.

Santa Cruz was not the only province to take away concessions, since Salta, Chubut, Neuquén and Mendoza have all done it recently.

Rumours that the Argentine President would announce the decision to nationalize YPF ran amok on Thursday in part thanks to statements issued by Neuquén governor Jorge Sapag, who announced that the Government would move forward with a “mixed company” model, which would remain part private, part state-run.

YPF, Argentina’s main oil and gas company, mostly owned by Spain’s Repsol has come under attack from the government which alleges insufficient investments and falling production which forced Argentina to import almost 11 billion dollars in energy last year.

The goal is regaining self sufficiency repeat the president and ministerial cabinet.

However industry officials say it's actually government policies, including price caps and constantly changing rules, which discourage investment in exploration and production.