Argentinian president moves to nationalise Spanish-owned oil assets

President Cristina Fernández de Kirchner shocks oil industry by planning to seize 51% of Repsol's Argentinian assets

guardian.co.uk, Terry Macalister and Uki Goñi in Buenos Aires, Monday 16 April 2012

The Argentinian president, Cristina Kirchner, said YPF had not produced
enough oil. Photograph: Pablo Porciuncula/AFP/Getty

Argentina sent shock waves through the oil industry by announcing plans to nationalise local oil assets controlled by a Spanish company, in a controversial move that threatens to sour the already troubled relationship between the two countries.

The move to seize 51% of Repsol's YPF business in Argentina sent the company's shares spinning down 18% on Wall Street and will worry other big foreign investors such as BP.

Cristina Fernández de Kirchner, Argentina's president, introduced the new measure to Congress in a bid to recover sovereignty over its national hydrocarbon resources.

Kirchner accused Repsol of failing to produce enough oil through YPF to meet Argentina's energy requirements. Repsol's alleged failure threatened to "practically turn us into an unviable country," Kirchner said. Economic and political interest in the country's hydrocarbons has rocketed since the end of last year when YPF announced it had discovered a shale oil site that could potentially yield 1bn barrels.

Politicians have accused Repsol of failing to invest enough in future production at a time when the high cost of oil is undermining the country's economy.

The nationalisation comes amid escalating threats against operators drilling for oil off the disputed Falkland Islands.

Argentina is expected to expropriate about 24% of YPF from Repsol and another 26% from Argentina's Peterson Group at a price yet to be determined by the government.

Kirchner said the price would be set by the national appraisal tribunal and insisted the business could continue to be managed "professionally". She said Argentina was one of the few countries that did not control its own oil.

YPF is Argentina's biggest oil company and was in the hands of the state until the early 1990s. It was acquired by the Spanish group in 1999 and the boss of Repsol, Antonio Brufau, has been in Argentina since last week trying to head off a takeover. He told Mitre, a local radio station: "You've got to talk, not impose."

Speaking in Madrid a few hours before the announcement, the Spanish prime minister, Mariano Rajoy, warned: "Wherever there is a Spanish company, the Spanish government will be there defending its interests as its own."

Last week, Spain's foreign minister, José Manuel García-Margallo, threatened to break off economic and fraternal relations with Argentina if Kirchner moved against YPF.

Independent petroleum experts were stunned by the development. "They are going to be closing the country as an investment destination," Anish Kapadia, an analyst at the London-based energy investment house Tudor Pickering Holt, told Bloomberg. BP, whose Pan American business in Argentina was a fully-integrated oil business covering exploration, production and petrol marketing, said it was unable to talk about what the nationalisation might mean for its business.

"We have not heard anything from the government. It is business as usual for us. I do not want to make a comment on someone else's business," said a company spokesman. BP tried to sell the business in 2010 for $7bn to Bridas Corporation, a deal which fell apart.

Kirchner's bill is expected to fly through Congress within the next couple of weeks thanks to the President's legislative majority.

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