Argentina’s YPF Seizure Jeopardizes Vaca Muerta Funds, IEA Says

Argentina’s seizure of YPF SA, the country’s biggest oil producer, may deter investment in the Vaca Muerta field that contains more than 20 billion barrels of oil equivalent, the International Energy Agency said.

President Cristina Fernandez de Kirchner took a 51 percent stake in YPF from Spain’s Repsol YPF SA and this week named Miguel Galuccio, formerly of Schlumberger Ltd., to head the company. YPF holds a 40 percent interest in the 30,000-square-kilometer (7.4 million-acre) field that holds shale oil and gas.

“The government takeover clouds the investment climate for international companies that might otherwise have been attracted to unconventional resources in the Vaca Muerta and other plays,” the IEA said today in a report. “Absent foreign-investor guarantees of contract sanctity, the move could deepen Argentina’s product import needs in the short and medium term.”

Fernandez accused Madrid-based Repsol of failing to invest enough in YPF to bolster output, forcing Argentina to double fuel imports to $9.4 billion last year. To reverse the decline in production, YPF is seeking partners to help it tap the country’s extensive shale oil and gas reserves.

Repsol has demanded $10.5 billion in compensation for the seizure, a figure the government rejects. Fernandez said the National Appraisal Tribunal will set the value of the takeover.

The second-biggest producer in Argentina is BP Plc, which holds a 60 percent stake in Pan American Energy LLC and was responsible for 75,000 barrels a day of oil production last year, compared with YPF’s 275,000 barrels, the IEA said. China Petrochemical Corp., the state-owned explorer known as Sinopec Group, was third with 40,000 barrels of output a day last year.

“In the near term we expect to see companies commit to new investments to secure their positions with the government,” the IEA said. “Absent guarantees of stability from the government, producers are unlikely to risk significant investment to develop shale deposits in the Neuquen basin and to employ costly technologies to enhance existing production.”

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