Energy and Natural Resources

Argentine provinces Chubut, Santa Cruz, Neuquén and Mendoza revert YPF’s minor hydrocarbons concessions

After demanding the company to submit investment plans for blocks located in each of the provinces of Chubut, Santa Cruz, Neuquén and Mendoza, the provincial administrations revoked the hydrocarbons exploitation concessions held by YPF, under the argument that the energy firm have failed to make the necessary investments and meet the expectations leading to boost oil and natural gas production, in compliance with article 80 of the Hydrocarbons Law.

The fields at stake are the following:

- El Trebol-Escalante and Campamento Central-Bella Vista Este-Cañadón Perdido in Chubut - Los Monos and Cerro Piedras-Cerro el Guadal Norte in Santa Cruz - Chihuido de la Salina and Portezuelo Minas in Neuquén - Ceferino and Cerro Mollar Norte in Mendoza

There is another block involved in Santa Cruz’s decision, namely Barranca Yankowsky, which assignment from BG International Limited, Argentine Branch to YPF (98%) and Oil M&S (2%) had been requested and is now denied based on similar disinvestment reasons.

The Governor of the Province of Salta has just announced that YPF’s exploitation concession over the currently unproductive Tartagal Oeste block will be reverted and will be part of a call for tenders jointly with other available fields.

YPF, controlled by the Spanish company Repsol, has become part of a growing dispute with the federal government amid pressure to increase output as Argentina struggles to face costly fuel imports to satisfy domestic energy demand. In parallel, requests made by provincial governments to YPF follow a consensus reached by the provinces grouped in the Federal Organization of Hydrocarbon-Producing States (OFEPHI, in Spanish) to demand oil companies an increase in production by 15% within the next two years.

Notably, the production gathered from the eight blocks reverted is equivalent, in the aggregate, to approximately seven percent of YPF’s national output.

Among the provinces involved in the decisions to revert blocks, Santa Cruz extracts about 20% of all Argentine oil while Neuquén is home to Vaca Muerta, a geological formation in which YPF announced a material unconventional hydrocarbons discovery last November.

Other two provinces, Formosa and La Pampa gave YPF an ultimatum to disclose their investment plans, under warning that they will pull some concessions as well. Lastly, the provinces of Jujuy and Tierra del Fuego have not made similar claims to YPF yet.

During a board of directors meeting held at YPF on 21 March, it was decided to propose the shareholders to capitalize the company for an amount equal to the dividends distributed during the last two fiscal years, e.g. AR$ 5.789 billion (approximately US$ 1.315 billion), to inject funds for the development of investment programs. The proposal was rejected by the director appointed by the Federal State but counted on the votes necessary for approval. The annual shareholders’ meeting will take place on 25 April.

For further information on this topic please contact Juan Martín Allende