Argentina has shocked the global oil and finance industries by nationalising YPF, but is now looking to Petrobras to fill the gap.
The announcement was mady by Argentine President, Cristina Fernandez, in essence appropriating the entire YPF organisation by nationalising a 57% Repsol-owned stake in the organisation. As Spain immediately pledged a diplomatic and industrial 'war' on Argentina, news emerged that China Petrochemical Group Corp (Sinopec Corp) had entered into talks with Spanish oil giant Repsol to buy its YPF stake.
Although the deal had apparently been in the pipeline for some five years, talks took on an added urgency as rumours of the possible nationalisation filtered through. Sinopec claimed to have a non-binding agreement in the region of $15 billion for the stake, although both companies declined to comment on the details.
After the nationalisation announcement, any Chinese investment in Argentina's oil sector is looking highly unlikely. One commentator described the climate in Argentina as a “political minefield”, citing the failed attempt by Chinese oil major CNOOC to purchase BP Plc's 60% stake in the Argentinian-based Pan American Energy LLC as a prime example of government interference blocking major energy deals.
With Argentina facing approbation of the world's oil and financial institutions, news emerged that the South American country has turned to its neighbours, Brazil, with a request for state-owned Petrobras to invest in Argentinian oil production to fill some of the gap left by the YPF nationalisation. "We are not asking Petrobras to replace (Repsol) but we would like it to increase its participation" in areas of Argentina, said Argentine Planning Minister Julio de Vido.
The request received a lukewarm, but not entirely negative, response from the Brazilian government and Petrobras themselves. However, with an already tense relationship between the two countries and Petrobras only suggesting limited investment - a criticism that was levelled at YPF and apparently led to Argentina's move to nationalise - the Brazilians are understandably cautious about increasing their exposure.
Ironically, de Vido also stated that Argentina were in talks with Sinopec, as well as Total, Chevron and ConocoPhilips regarding further investment.