Argentina to Expropriate YPF, Share Ownership with Provinces

BUENOS AIRES - Argentine President Cristina Kirchner said Monday she will ask Congress to expropriate oil-and-gas producer YPF SA, allowing the government to share ownership of the company with oil producing provinces.

The bill would give the government and the provinces a total of 51% of ownership in YPF, Kirchner said in a speech announcing YPF's expropriation. Of that controlling stake, she added, the federal government will obtain 51% while the provinces will split the remaining 49%.

Given widespread public support for state management of the company, the bill seems likely to become law.

Kirchner blamed YPF for declining oil and gas production and said the company is largely responsible for forcing Argentina to become dependent on imported oil and gas for the first time in 17 years. She said a lack of investment in the sector led Argentina to incur an energy deficit surpassing $3 billion last year.

"This situation almost turned us into an inviable country," Kirchner said.

Argentina is the only major Latin American country without a significant state presence in the oil industry. Mexico, Chile, Brazil, Venezuela, Peru, Colombia, Bolivia, and even tiny Uruguay, all boast state-run firms that are important players in their respective oil and gas industries.

Kirchner said it is time for Argentina to join these countries in regaining influence over its oil and gas industry.

"We've shown that state projects can be managed well too," said Kirchner, answering critics who have claimed the government doesn't have the technical expertise or the money to run YPF.

YPF is majority owned by Spain's Repsol YPF SA. Though Repsol YPF owns 57.4% of YPF, it is actually Argentina's Eskenazi family, which holds a 25.5% stake, that is responsible for day-to-day management of the firm.

The rest of the company's shares trade on stock exchanges in New York and Buenos Aires.

YPF shares traded in New York were down almost 16% to $18.41 shortly after the announcement. The stock had fallen as low as $17.41.

A spokeswoman for Spain's foreign ministry said the government had no immediate comment. A spokesman for YPF did not immediately respond to a request for comment.

The bill calls for YPF's shareholders to be compensated at a value to be determined by a federal tribunal.

Repsol sources had previously said the government would have to pay around $18 billion to take full control of YPF, according to YPF's statutes and relevant Argentine law.

The government would be required to make an offer for all of YPF's shares even if it wanted to obtain only 51% of them, according to the company's bylaws.

The Spanish company had said it would vigorously defend shareholders' rights in local and international forums if the government tried to expropriate the company without abiding by all legal obligations.

The bill will also declare hydrocarbon self sufficiency. to be in the country's national interest.

Copyright (c) 2012 Dow Jones & Company, Inc.


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