MercoPress. South Atlantic News Agency

A year on YPF’s seizure, Argentina’s energy challenge remains equally strong

The energy bill this winter could be even higher according to the first two months of the year

Argentina’s President Cristina Fernández takeover of YPF to pare energy imports is backfiring and threatening to narrow the country’s trade surplus needed to pay debt, according to a report from Bloomberg.

YPF which is Argentina’s largest energy producer will have to spend an extra 400 million dollars to import fuel to supply its service stations after a flood and fire at its La Plata refinery reduced output.

This will further weaken a trade surplus that narrowed 60% in February from a year earlier and hamper government efforts to build reserves used to pay foreign bondholders. Central Bank reserves fell 7% this year to 40.4 billion dollars.

A year after Cristina Fernández nationalized a majority stake in YPF from Spain’s Repsol, output remains virtually flat and foreign investment needed to tap the world’s third-largest shale deposit hasn’t materialized as expected.

The administration of Cristina Fernandez argued for the seizure that Repsol was not committing sufficient funds to keep needed oil and gas exploration and production, while reserves plummeted and imports soared.

Argentina, which hasn’t borrowed from international credit markets since its 95 billion default in 2001 due to borrowing costs of 13.95%, has imposed currency controls and import restrictions in a bid to slow capital outflows and maintain a positive trade balance.

Argentina’s trade surplus may shrink to 11 billion this year from 12.7bn in 2012 on the increased fuel imports, according to Alejandro Ovando, an economist at research firm IES.

Argentina’s economy imported 1.3bn in energy in the first two months of the year, compared with 840 million in the same period last year, according to Ovando’s estimates. The deficit in energy trade may reach a record 5bn this year, compared with a 3bn deficit in 2011, according to estimates by Mauricio Claveri, an economist at research company Abeceb.com in Buenos Aires.

Lack of investment in production and economic growth that averaged 7.7% per year between 2003 and 2010 has swung an energy surplus to a deficit in 2011, Claveri said. A recovery in the economy, which may expand as much as 3% this year from 1.9% in 2012, may boost domestic energy demand further, he added.