China’s CNPC, Cnooc Group Said to Seek Stake in Repsol’s YPF

 Repsol YPF SA is in talks with China National Petroleum Corp. and China National Offshore Oil Corp. about a sale of a stake in its Argentinean unit, three people familiar with the discussions said.

China National Petroleum, or CNPC, may make an offer of about $13 billion to $14.5 billion for Repsol’s 75 percent stake in YPF SA this month, said one of the people, who declined to be identified because the talks are private. Cnooc Group, China’s biggest offshore oil producer, is preparing a rival bid to buy a minority stake in the Argentinean unit, the people said.

Repsol wants to cut its controlling stake in Buenos Aires- based YPF to focus on finding new reserves in countries such as Libya, Brazil and Algeria. Chief Executive Officer Antonio Brufau in June reiterated Repsol’s intention to sell a stake after the company last year delayed a planned public offering. China, the world’s second-biggest energy consumer, is taking advantage of a drop in oil and stock prices to secure oil supplies through acquisitions.

“We have had many expressions of interest in our business in Latin America,” said Kristian Rix, a spokesman for Repsol in Madrid. The company hasn’t received any formal offers and isn’t in talks with potential buyers, he added.

Zhang Guobao, vice chairman of the National Development and Reform Commission, China’s top planning agency, said today CNPC is in talks with Repsol, without giving further details.

Overseas Interest

Cnooc Group also wants to team up with Repsol to develop oil and gas exploration and development operations in other countries, the people said. Cnooc Group hasn’t decided whether its Chinese parent or Hong Kong-listed unit will make the acquisition, two of the people said. Liu Weijiang, China National Petroleum’s Beijing-based spokesman, and Li Shiqiang, a spokesman for China National Offshore Oil, also known as Cnooc Group, weren’t immediately available to comment.

Overseas oil companies are renewing their interest in Argentina after the government of President Cristina Fernandez de Kirchner lost its majority in congress in legislative elections on June 29, said Daniel Montamat, a former energy minister of Argentina who now works as an industry consultant.

“I can’t see the government trying to block this,” Montamat said. “I see a weakened government right now. There are new political expectations in Argentina.”

Fernandez nationalized about $24 billion in pension funds last year, and Congress in December approved her plans to take over the country’s biggest airline, Aerolineas Argentinas SA, from Spain’s Grupo Marsans. Under the government of Fernandez’s husband and predecessor Nestor Kirchner, Argentina nationalized the largest water utility and the national postal service.

Kirchner Taxes

Repsol bought the stake in YPF for about $15.5 billion when the government of Carlos Menem sold the company in 1999. Caps on oil prices introduced in 2007 by Kirchner have since eroded earnings. YPF reported a 59 percent decline in first-quarter net income in May.

Kirchner set a maximum price that companies could earn on each barrel of oil exported at $42 a barrel. All revenue above that amount is collected as taxes, according to Repsol. Taxes on exports below that amount are as high as 45 percent. The government stopped diesel exports in 2005, according to Repsol.

A month after Kirchner’s price caps, Repsol agreed to sell 15 percent of YPF to Petersen Energia SA, owned by Argentine investor Enrique Eskenazi, for about $2.2 billion. Eskenazi has an option to buy an additional 10 percent.

CNPC would likely pay a similar amount as Eskenazi, one of the people familiar with the situation said. Repsol, which financed about 45 percent of Eskenazi’s investment in YPF, would not fund a purchase by CNPC, one of the people said. Petersen’s stake allows it to veto the sale of any shares in YPF to another company, according to Montamat.

China Spending

China plans to boost spending on oil exploration and development by 47 percent by 2015 as domestic energy demand rises, the government said in a June 11 report.

Total investment made by companies including PetroChina Co. and China Petroleum & Chemical Corp. may rise to 280 billion yuan ($41 billion) in 2015 from 190 billion yuan last year, according to the government report on China’s energy needs.

China Petrochemical, or Sinopec, the nation’s second- biggest oil company, last week agreed to buy Canada’s Addax Petroleum Corp. for C$8.3 billion ($7.2 billion), to gain reserves in Iraq’s Kurdistan and West Africa.

YPF accounts for 52 percent of Argentina’s refining capacity through three refineries in the provinces of Buenos Aires, Mendoza and Neuquen, according to the company’s Web site. YPF also explores for oil and gas and operates a chain of service stations across the South American country.

Source from Bloomberg