Argentina Blasted for YPF Nationalization

Spanish refiner Repsol and Spains government blasted Argentinas decision to nationalize oil and gas company YPF SA, which would put 51 percent of Repsol-owned shares under government control.

YPF is Argentinas leading lubricants supplier and operates a base oil plant.

The nationalization will leave Repsol with a 6 percent stake in the company. Repsols 57 percent stake in YPF was valued at 4.1 billion (U.S. $5.4 billion) in consolidated financial statements as of Dec. 31.

Argentinian President Cristina Kirchner during a speech Monday announced she would send a bill to nationalize YPF to Argentinas Congress, saying the petroleum industry is of national public interest, and that the country has had to increasingly rely on imported oil and gas because of YPFs declines in production.

According to Repsol, the Argentinian government on Monday approved a decree with immediate effect to administer YPF for a 30-day period and appoints a minister of the government as controller with all the powers of YPFs board of directors.

Repsol considers the announced measure to be manifestly unlawful and gravely discriminatory, that its public interest has in no way been justified, and clearly contravenes the obligation undertaken by the Republic of Argentina during the privatization of YPF, breaching the most basic principles of legal certainty and of reliance by the international investment community, Repsol said in a statement yesterday.

Repsol said it would pursue all pertinent legal actions to preserve the value of its assets and the interests of all its shareholders.

As things stand, the decision adopted by the government of Argentina announcing the nationalization of an important part, the majority, of the shares held by Repsol in YPF, is a hostile decision against Repsol, against a Spanish company, and therefore against Spain and the government of Spain, Jose Manuel Soria, Spains minister for industry, energy and tourism, said in a statement Monday. The government of Spain will act in consequence and that means we have begun to work this afternoon on measures related to this decision, measures that will be announced over the coming days.

Originally a government entity, YPF became a private enterprise in 1993 and merged with Repsol in 1999. The integrated oil companys assets include an API Group I base oil plant in La Plata, Argentina, with 4,700 barrels per day capacity.

According to a YPF presentation at the ICIS Pan American Base Oils & Lubricants conference in Jersey City, N.J., in December 2011, Argentinas lubricants market was expected to reach 315,000 cubic meters (285,000 metric tons) in 2011. YPF is Argentinas lubricants leader, with 38 percent of the overall lubes market in 2011, up from 34 percent in 2008. Total held 12 percent of the market, followed by Shell (22 percent), ExxonMobil (8 percent), Petrobras (7 percent), Chevron (4 percent) and Petronas (3 percent), with smaller players sharing the remainder.

YPF has an extensive network of service stations, which perform engine oil changes and other fluid services. It also partners with many automotive OEMs, such as GM, Ford and VW, to supply lubricants for factory fill, and with dealerships for service fill.

Repsol markets lubricants directly and through distributors in more than 60 countries. The company has two base oil refineries: a 2,100 barrels per day API Group I plant in Puertollano, Spain, and a 2,900 b/d plant, primarily Group I, in Cartagena, Spain. In June 2010, SK Lubricants of Seoul, South Korea, announced plans to partner with Repsol to build a 13,000 b/d Group III base oil plant at Repsols Cartagena refinery. It is scheduled to begin production in 2013.