Argentina's Congress has voted to fully privatize state petroleum company Yacimientos Petroliferos Fiscales (YPF), a move the government expects to net at least $8 billion.
Despite some political opposition, the vote was 119-10 in favor, with one abstention and opposition party members refusing to participate in the vote. Argentina's President Carlos Menem had threatened to authorize YPF privatization by decree if there was no quorum for a vote.
YPF is responsible for 40% of Argentina's oil production. The country has been self-sufficient in crude since 1982. Current production is 563,472 b/d, and proved reserves of oil and gas are valued at $7 billion.
WHAT'S INVOLVED
Privatization of YPF will begin with sale of half of the company's refining operations and drilling rig fleet and 49% of the shares of marketing subsidiary Trading Interpetrol (TI). TI is valued at about $1 billion.
In a second phase, 70% of YPF stock will be sold. Final guidelines for the sale process have not been established.
Argentina's Congress focused on ultimately reducing the central government's ownership participation in the country's petroleum sector to 20%. Argentine provinces have an automatic right to 39% of YPF shares but must sell at least half of those interests within 3 years.
The state will continue to control half of the nation's hydrocarbon reserves and production. The state also will continue to maintain control over marketing of petroleum products in Buenos Aires.
YPF PRIVATIZATION
YPF privatization represents the biggest part of the Menem government's ambitious plan to sell state interests in a wide range of businesses.
Ricardo Gutierrez, secretary of the economic ministry, estimates the overall privatization program will raise $14.2 billion, of which $10.5 billion will come from public share offerings. The government plans to use the funds to reduce domestic and international debt.
At the same time, government privatization will reduce the number of public employees by 270,000.
Studies by the Argentine Undersecretariat for Privatization show that 65.5% of state company interests privatized to date have been sold to foreign interests, with the remainder in private domestic hands.
Perhaps some of the most profound changes already have taken place at YPF. Under a massive restructuring led by YPF Pres. Jose Estenssoro, the state company reduced its work force to 19,300 from 52,000 while production grew significantly.
Petroleum analysts told the Brazilian press YPF privatization will lend impetus to the Brazilian government's efforts to end the petroleum monopoly of state owned Petroleos Brasileiro SA in Brazil. Without that, Brazil faces possible trade problems under Mercosul, the proposed common market of Argentina, Brazil, Paraguay, and Uruguay.
REMAINING CONCERNS
The big remaining concern is how the public offering of YPF stock will proceed. The government wants to avoid the confusion that prevailed when stock in state telephone companies Telecom and Telefonica de Espanha were sold to private interests.
The government has yet to set a ceiling on the degree of private participation in the state oil company. Opposition party members fear that without a limit, YPF will fall under the control of a single entity.
YPF is Argentina's biggest exporter, accounting for a projected $600 million in exports this year. YPF cash flow is pegged at $10 million/day, and the state company forecasts its 1992 profits at $300 million.
Despite the size and scope of its operations, YPF is strapped for cash and needs an infusion of imported technology. That situation led to the company some years ago granting concessions to private companies to explore in Patagonia and Tierro del Fuego in far southern Argentina, ahead of the privatization campaign (OGJ, Jan. 14, 1991, p. 51).
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
