YPF Said to Expect Approval to Double Argentine Gas Prices

YPF SA, Argentina’s biggest energy company, expects to receive government approval to more than double natural-gas prices to help fund expansions, according to two shareholders briefed on the plan.

YPF’s Chief Executive Officer Miguel Galuccio told investors last month that Deputy Economy Minister Axel Kicillof agreed to start increasing prices by year-end, said one shareholder who attended the briefing. The average price that the government pays producers may reach $5.50 per million British thermal unit from $2.50, the second shareholder said. Consumer prices in Argentina are subsidized.

Both shareholders declined to be identified because the increase hasn’t been made public. Jessica Rey, a spokeswoman for Kicillof, who heads the country’s energy commission, didn’t reply to calls seeking comment. YPF spokesman Alejandro Di Lazzaro declined to comment.

YPF, which was nationalized in April, is basing a $37.2 billion five-year investment plan on a doubling of the average gas price while the province of Neuquen is making the same assumption for its budget next year, said the second shareholder. Neuquen, home to the Vaca Muerta shale gas formation, holds 10.5 percent of YPF.

Government Subsidies

The price increase would also benefit non-government producers in Argentina. A unit of Total SA is the country’s largest gas producer with a 30.45 percent market share, YPF has 22.97 percent, BP Plc’s Pan American Energy LLC has 12.05 percent, Petrobras Argentina SA has 8.92 percent and an Apache Corp. unit has 3.9 percent, according to data on the Argentine Institute of Oil and Gas’s website.

“If Argentina wants to produce more gas, the price paid to producers should be increased,” Fitch Ratings analyst Ana Paula Ares, who covers Argentine gas producers, said in a telephone interview from Buenos Aires.

President Cristina Fernandez de Kirchner last week submitted a budget proposal that sets aside 12 billion pesos ($2.6 billion) for subsidies to energy companies and authorizes withdrawals from central bank reserves to provide the aid.

Kicillof postponed by a month a deadline for natural gas companies to submit business plans, the Official Gazette said yesterday. Companies will have until Nov. 5 to submit annual plans to the commission he presides.

YPF American depositary receipts gained 3.1 percent to $12.53 at 2:41 p.m. in New York, after earlier rising as much as 4.8 percent, the biggest intraday gain since Sept. 21. The stock has dropped 64 percent this year.

Previous Increases

Fernandez on Aug. 9 quadrupled the price of compressed natural gas (CNG), used as car fuel, which is paid to producers. It was the first increase since the government in July created the oil planning commission headed by Kicillof.

“The increase will give gas producers an extra 900 million pesos and 119 million pesos in royalties to the provinces,” President Cristina Fernandez de Kirchner said.

Galuccio said on Aug. 30, while presenting YPF’s five-year business plan, that the company was in talks with the Argentine government to get increases in gas prices. Galuccio said he was confident in getting a response and didn’t elaborate further.

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