Sinopec Tries to Buy Argentine Oil Firm YPF

China Petrochemical Corp. (Sinopec Group) is in talks to buy Argentine oil and gas company YPF S.A., a source close to Sinopec says.

Sinopec is negotiating with Repsol-YPF S.A., Spain's largest industrial company and the sixth-largest oil company in Europe by sales, on a non-binding agreement, the source said. The acquisition price was over US$ 15 billion.

In early April, China National Offshore Oil Corp. (CNOOC) planned to buy Argentina's YPF for 9.16 billion euros, Spanish newspaper El Confidencial reported. But the source close to Sinopec said CNOOC was not involved.
Sinopec intended to acquire all the shares owned by Repsol, whose board of directors supported the deal, the source said. The deal would need to be approved by authorities in Spain and Argentina.

YPF S.A., the largest oil company in Argentina, was a state-owned enterprise in 1990s, but was later privatized. In recent weeks, the relationship between YPF and the Argentine government has been strained. The government headed by Cristina Fernandez de Kirchner has blamed YPF for a lack of investment in the sector, leading to shortages of refined oil.

Six Argentine provinces have withdrawn exploration licenses involving ten areas from YPF.

The official Xinhua News Agency reported that the Argentine government has told its congress that it aimed to buy a 50.1 percent stake in YPF, enough to be its controlling shareholder.

The Argentine government strictly controls oil prices, keeping them low and sapping the enthusiasm of oil firms. In addition, Argentina has imposed 40 percent tariffs on exported oil and gas. Earlier this year, YPF was in a dispute with the government over a US$ 8 million tax bill for natural gas export.
 
Sinopec sees huge potential in the oil blocks owned by YPF in Argentina and is confident it can meet the requirements of Kirchner's government to speed up exploration, a second source familiar with the situation said.