BUENOS AIRES - Argentina's Mendoza Province said Friday it will revoke two concessions held by the country's largest energy producer, YPF SA, as part of a broader dispute between the Spanish-controlled company and Argentine authorities over investment.
Mendoza is the fourth province after Neuquen, Chubut and Santa Cruz to revoke YPF concessions. The provinces said the company, in which Spain's Repsol YPF SA has a controlling stake, hasn't invested enough in its operations to increase oil-and-gas production.
The concessions will revert to the Mendoza provincial government in 90 days because YPF didn't meet its contractual investment obligations, a spokeswoman for the governor said in a telephone interview.
The concessions, known as Ceferino and Cerro Mollar Norte, produced negligible amounts of oil and gas in 2011, according to the federal Energy Secretariat.
However, YPF said it has complied with the province's investment requirements and will defend its interests in the courts.
Fears that the federal government might nationalize YPF have taken a toll on YPF's share price, which has fallen nearly 13% so far this year. But investors took the latest concession grab in stride, with the stock recently trading 1.7% higher at ARS146.00.
YPF's crude-oil production fell 7.6% to 222,600 barrels a day last year, while natural-gas output dropped 10.2%.
Provincial governors have the most to gain from higher output as Argentina's constitution grants them control over oil-and-gas concessions and royalties in their provinces.
The provinces so far have shied away from revoking concessions that represent a substantial portion of the embattled company's output. But they recently have moved to coordinate with the administration of President Cristina Kirchner to force YPF to invest more in exploration and production at a time when declining oil-and-gas output has turned Argentina into a net energy importer after being a net exporter as recently as 2010.
Wednesday, YPF's board of directors said the company will invest an estimated ARS15 billion ($3.45 billion) this year, up from ARS13.79 billion in 2011.
The board also approved a stock dividend, instead of cash, in an attempt to placate the government, which is trying to protect the central bank's international reserves by limiting foreign-currency outflows.
Even so, the administration's only representative on the board, Roberto Baratta, voted against the proposal.
Deputy Economy Minister Axel Kicillof, who participated in the board meeting, criticized the dividend decision, saying "it could amount to a speculative move to affect the stock's price."
If YPF doesn't create a special pool of money to fund its investments and provide "cheap energy" to the economy, Kicillof warned the government will use all the tools at its disposal to force the company's hand.
Speculation that the government might take over YPF has been on the rise since January, when local newspaper Pagina 12, which is close to the government, reported the Kirchner administration was considering the outright nationalization of the company. Last Sunday, Pagina 12 said the government plans to take control of YPF before the start of the Southern Hemisphere's winter.
Kirchner's cabinet chief, Juan Manuel Abal Medina, did little to clarify the government's thinking when he said Wednesday the administration wouldn't "rule out" a nationalization, a day after he had said officials weren't considering a takeover.
Copyright (c) 2012 Dow Jones & Company, Inc.
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