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YPF Said to Lose Oil Partners as Government Cracks Down

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Feb. 14 (Bloomberg) -- YPF SA, 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 negotiations 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, 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.”

Vaca Muerta

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 2.8 percent to $32.76 in New York, after falling as much as 7.3 percent earlier today.

A YPF official, who can’t be named under corporate policy, declined to comment. Horacio Mizrahi, a spokesman for the Argentine Planning Ministry, didn’t 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.

Exxon, Americas Petrogas

Exxon Mobil Corp. and Americas Petrogas Inc. are among the companies investing in Argentine shale oil and gas production. The two companies plan to invest as much as $2 billion in the next five years to achieve 10,000 barrels a day of production, Calgary-based Petrogas Managing Director Guimar Vaca Coca said in an interview in Buenos Aires last month.

Some of the eight companies with which YPF was in talks have licenses for exploration in Argentina, according to the person, who declined to identify any of the producers.

YPF is 57 percent owned by Madrid-based Repsol YPF SA, while the Eskenazi family’s Petersen Group controls 25 percent.

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.

Madalena Ventures Inc., a Calgary-based oil and gas explorer, produced 314 barrels of shale oil a day at a well in the Vaca Muerta formation during a two-day test period, it said yesterday in a statement. The well at the Coiron Amargo Block in Neuquen province is close to YPF’s Loma La Lata field, it said.

Argentine government officials, lawmakers and oil industry specialists discussed a possible nationalization of YPF on several recent occasions, Buenos Aires-based newspaper Pagina/12 reported on Jan. 29, without saying where it got the information.

To contact the reporters on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net; Laura Price in Buenos Aires at lprice3@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net