YPF SA (YPF), Argentina’s largest energy company, lost eight potential investors in South America’s biggest shale deposits after government measures made oil investments less attractive, according to a person familiar with the talks.
Companies from the U.S., Canada and Europe abandoned talks after the government withdrew financial incentives for producers and forced companies to repatriate export revenue, the person said, declining to be identified because talks are private. Six of the producers cited unpredictable policies, this person said.
President Cristina Fernandez de Kirchner is pressuring oil companies to boost investment after blaming them for a doubling of crude imports in 2011. Fernandez on Feb. 3 withdrew an incentive program because of an increase in local oil prices since the payments were introduced in 2008. In October she ordered oil and mining companies to repatriate export revenue in a bid to stem capital flight. The government also voted against a dividend payment by YPF in November.
“You can’t get a return out of Argentina that is as attractive as in other places in the world,” Jason Kenney, an analyst at Banco Santander SA (SAN), said in a telephone interview from Edinburgh today. “The sooner they can begin to operate without price caps, without regulatory oversight, and they can be encouraging of investment, probably the better.”
YPF announced last week that the 30,000 square kilometer Vaca Muerta formation in southern Argentina holds at least 23 billion barrels of oil equivalent, according to an external audit that surveyed about 8,000 square kilometers of the area. YPF has about 13 billion barrels in that area, the company said. Developing the entire 23 billion barrels will cost about $25 billion per year for a decade, the company said.
YPF’s American Depositary Receipts dropped as much as 7.3 percent to $31.22 in New York and were trading at $31.92 as of 12:57 p.m. local time.
A YPF official, who cannot be named under corporate policy, declined to comment. Horacio Mizrahi, a spokesman for the Argentine Planning Ministry, did not immediately respond to a phone call and an e-mail.
“The attraction of international capital to Argentina as a source of financing the enormous economic resources that this project will require in coming years is a mandatory condition for a project of such magnitude,” YPF said last week.
The boom in shale oil and gas production in recent years has placed the U.S. to the closest it has been in almost two decades to achieving energy self-sufficiency. Global energy producers from Total SA to BHP Billiton Ltd. are investing in shale formations impervious to traditional drilling methods.
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