Spain Repsol rejects Argentine compensation offer for YPF seizure

27 June 2013 00:00  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--The board of Spanish energy company Repsol unanimously rejected on Wednesday a noncash offer of $5bn (€3.8bn) in compensation from Argentina for last year’s seizure of Repsol’s majority share in Yacimientos Petroliferos Fiscales (YPF).

Argentina’s government expropriated 51% of YPF in May 2012 following a dispute with the Spanish company over under-investment and dwindling production levels.

The rejected proposal would have given Repsol a 47% share in a new joint venture – worth an estimated $3.5bn – to exploit a small part of the Vaca Muerta shale fields in Argentina. YPF would have held 51%, while Mexico’s Pemex would have received 2%.

Argentina also offered Repsol $1.5bn in capital with the proviso that this amount would have to be reinvested in the Vaca Muerta venture.

After an “exhaustive, internal technical and economic analysis” and supported by “reports prepared by external experts”, Repsol considered an offer of $5bn “unsatisfactory to the interests of the company” because “the amount does not tally to the loss suffered by Repsol.”

The company concluded that the offer was based on “overvalued assets not in relation to market values”.

Despite Repsol’s rejection of the offer, the company acknowledged Argentina’s “interest” in a negotiated solution to the dispute and hoped to maintain an open dialogue with the aim of reaching a negotiated settlement.

Repsol said any future offer must “represent fair compensation and the ending of the claims surrounding the expropriation”.

According to the US Energy Information Administration (EIA), Argentina has the world’s second largest shale gas reserves, with an estimated 8,020bn cubic feet (bcf) of recoverable gas.

YPF is keen to partner with companies to develop its shale potential; however, following the expropriation of YPF, investors have been cautious.

The Argentine company did not immediately respond to requests for comment.

($1 = €0.76)

By: Simon West

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