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Argentine Province Pulls Oil Concessions Held By Petrobras, Others

04/04/2012 | 07:50pm US/Eastern

--Neuquen province revokes oil and gas concessions held by three firms

--The move affects Brazilian and Canadian investors

--Provincial, federal governments are pressuring oil and gas companies to invest more

(Updates with comments by Petrobras Argentina and Canada's Azabache Energy)

 
   By Ken Parks 
   Of  
 

Argentina's Neuquen province has revoked oil and gas concessions held by three companies, including a subsidiary of Brazil's state energy giant Petroleo Brasileiro (PBR, PETR4.BR), in a broader dispute over investment in exploration and production.

Argentina's President Cristina Kirchner has brought significant regulatory and political pressure to bear on the energy industry this year. She blames low investment by oil and gas companies for falling output that has turned the South American nation into a net energy importer.

At the administration's behest, oil and gas rich provinces have rescinded concessions in recent months, accusing producers of not investing enough to boost output.

The vast majority of those concessions were held by the country's biggest oil and gas producer, YPF SA (YPF, YPFD.BA). Now Brazilian and Canadian investors have been dragged into Kirchner's battle with producers.

The Neuquen provincial government said it rescinded concessions held by Argentina's Tecpetrol SA, Canada's Azabache Energy Inc (AZBCF) and Brazilian-controlled Petrobras Argentina SA (PZE, PESA.BA) because they hadn't invested enough in putting the oil fields into production.

In a conciliatory statement Wednesday night, Petrobras Argentina said it has complied with the investment requirements of its Veta Escondida block.

"The company continues to be at the disposition of the provincial authorities with a view to maintain a constructive dialogue about its current and future ventures," Petrobras said.

Calgary-based Azabache said in a statement that it has invested more than the contractual minimum at the Covunco Norte block, which represents about 2% of its holdings in Argentina, and will attempt to meet with provincial authorities early next week.

A representative for Tecpetrol--the exploration and production arm of Argentina's largest industrial conglomerate, Techint Group--couldn't be reached for comment.

Neuquen is one of Argentina's top oil and gas producers. The province is also thought to be home to significant deposits of unconventional oil and gas locked away in shale rock.

The province said in a statement Tuesday the fields covered by the three concessions aren't producing oil and gas.

The concessions will be given to the provincial government's oil and gas company, Gas y Petroleo del Neuquen SA.

So far, nearly all of the concessions revoked by the provinces have been related to fields with little or no oil and gas production.

The biggest exception is a concession that Chubut Province says it will pull from YPF. That concession accounts for 10% of YPF's total domestic crude oil output.

YPF has denied the charges of insufficient investment and pledged to defend itself in the courts.

Local media have interpreted the pressure on YPF as a precursor to an eventual government takeover of the firm, which was run by the state until its privatization in the 1990s.

The government hasn't done much to clarify its position.

Two weeks ago, Kirchner's cabinet chief, Juan Manuel Abal Medina, said all options are on the table just a day after he appeared to rule out the nationalization of the company.

-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740, ken.parks@dowjones.com

--Jeff Fick and Taos Turner contributed to this article.

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