President Kirchner said Monday she will send a bill to Congress to nationalize the oil and gas company, YPF. Kirchner blames the company for falling oil and gas output, as well as the government’s growing need to import expensive fuel.
But it’s unclear how nationalizing the company will solve Argentina’s energy problems. Critics say the government itself is responsible for declining production. They cite unpredictable government policies and price caps, among other things, for the problems.
Raising production will require billions of dollars of investment in exploration and extraction. Where will that money come from now that the government will own the company?
Kirchner didn’t say.
Meanwhile, YPF’s parent company, Spain’s Repsol YPF, said it will fight the government’s decision, ensuring a lengthy and messy legal, political and economic battle over how the government will compensate Repsol for expropriating its top asset.
Within hours of the announcement, government officials were already in YPF’s building, located in Puerto Madero, taking over management of the company.
My colleagues and I wrote about the issue here for The Wall Street Journal.