Repsol Deal to Open Argentine Energy Investment, Capitanich Says

Argentine Cabinet Chief Jorge Capitanich said an agreement to pay Repsol SA $5 billion in compensation for the expropriation of its controlling stake in YPF SA will open the door for increased energy investment.

The proposed compensation plan, which was already approved by the Senate and is being voted on today by the lower house, would provide the Madrid-based energy company with $5 billion worth of government bonds and end international lawsuits over the 2012 takeover of YPF.

“The bill will be converted into law today,” Capitanich told a room full of business leaders during an hour-long speech at the Alvear hotel in Buenos Aires including Pan American Energy LLC board member Alejandro Bulgheroni. “It’s a very important step to have capital market access and multiply our efforts to explore for and develop oil and gas to achieve self-sufficiency.”

Argentina posted a record $6.1 billion energy deficit last year as output at mature wells declines and demand surges amid subsidized rates for consumers. YPF, which is now 51 percent owned by the government and run by former Schlumberger Ltd. executive Miguel Galuccio, has partnered with Chevron Corp. to develop shale deposits of Vaca Muerta in western Argentina.

President Cristina Fernandez de Kirchner seized Repsol’s controlling stake in YPF in April 2012 for allegedly failing to invest sufficiently in production. Repsol initially sought as much as $10.5 billion in compensation and filed lawsuits in courts around the world including the World Bank’s arbitration tribunal.

Capital Markets

The government will need a total of about $149 billion of investment for infrastructure projects over the next decade, Capitanich said, adding that multilateral lenders will provide about $5 billion a year.

Fernandez’s government has taken steps to regain access to the international capital markets in order to finance development projects while lowering Argentina’s debt level, Capitanich said. The biggest challenges for the nation remain resolving its energy deficit, continuing with the industrialization of the country and boosting exports, he said.

YPF sold $1 billion of bonds due 2024 this year at 8.75 percent, the largest bond sale ever for an Argentine company. YPF plans to invest about $5 billion this year, Galuccio said last month.

Malaysia’s Petroliam Nasional Bhd. signed a memorandum of understanding with YPF in February and companies from Royal Dutch Shell Plc to Petroleo Brasileiro SA have pledged shale investments this year.

YPF, the largest energy producer in Argentina, said first-quarter gas output rose 10 percent from a year earlier while oil production rose 7.8 percent. Output at the state-run producer has risen five consecutive quarters, the company said.

“We think the energy issue is the key for sustainable growth in Argentina,” Capitanich said.

To contact the reporter on this story: Daniel Cancel in Buenos Aires at dcancel@bloomberg.net

To contact the editors responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net Robert Jameson

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