Argentina to Create $2 Billion Oil, Gas Development Fund


Argentina's government plans to put up to $2 billion into a new petroleum exploration-and-production fund as the South American nation struggles to become self sufficient in oil and natural gas.

The Argentine Hydrocarbon Fund is authorized to lend money, contribute capital and buy securities issued by oil companies in which the government has an equity stake, according to a resolution published Friday in the government-published Official Bulletin.

The government controls energy companies Enarsa and YPF SA.

It wasn't immediately clear how President Cristina Kirchner will capitalize the fund. Barclays said in a report it thinks the money will come from central bank's foreign currency reserves.

The 2013 budget earmarks almost $8 billion of reserves to pay creditors. But economic growth of just 1.9% last year means that Argentina won't have to pay several billion dollars to investors that own securities whose payouts are linked to the economy's performance.

"We expect, therefore, the treasury to tap reserves and issue a low-coupon hard-currency bond [most likely not marketable] to the central bank," Barclays economist Sebastian Vargas wrote.

A spokeswoman for the Economy Ministry didn't immediately reply to a phone call and email seeking comment.

The central bank, a virtual appendage of the Economy Ministry, is struggling to rebuild its reserves even as a bumper soybean harvest brings billions of export dollars into the country.

On Thursday, those reserves, which the government uses to pay its creditors and buy imported fuels like natural gas, slipped to a six-year low of $39.8 billion. Analysts blame the gradual erosion in reserves on the decline in the value of the bank's gold holdings and persistent capital outflows.

A fire last month that crippled YPF's largest refinery which supplies about 30% of Argentina's domestically produced fuel will force the state controlled company to import significantly more diesel and gasoline this year, putting even more pressure on reserves.

Mrs. Kirchner seized a controlling stake in Argentina's No. 1 oil and gas producer, YPF, from Spain's Repsol SA last year and has tasked the company with reversing years of declining production that have turned Argentina into a net energy importer.

Mrs. Kirchner accused Repsol of decapitalizing YPF through an overly generous dividend policy, which left the firm with scant resources to reinvest in its business. Repsol has denied those accusations and is suing her government for about $10.5 billion in compensation for its YPF shares.

YPF invested 16.48 billion pesos ($3.2 billion) in 2012, an increase of nearly 26% on the year.

The company is also seeking foreign investors to help it develop what are believed to be the world's third-largest shale gas deposits, which are mainly located in the Patagonian province of Neuquen.

Last year, YPF held talks with Norway's Statoil ASA, Russia's government-controlled gas company, Gazprom, and Chevron Corp., among others.

In December, YPF signed a preliminary agreement with Chevron to spend $1 billion to drill 100 wells in Neuquen, and in a separate deal it agreed to invest $1.5 billion with a company linked to Argentina's Bulgheroni family.

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


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