Repsol to sue governors in Argentina for revoking oil leases

Spanish oil giant Repsol announced Thursday that it will go to court to reclaim four oil fields, which were taken over by local provincial governors in Argentina as part of a larger national bid to boost production in the energy-starved nation.

Repsol’s Argentinean unit YPF was ordered on Wednesday to hand over the concessions to the Escalante-El Trébol and Central-Cañadón Perdido Camp oil fields, both located in Chubut province, close to the frontier with Santa Cruz, and the Cerro Guadal Norte-Cerro Piedras and Los Monos oil fields in Santa Cruz. Together, they represent seven percent of all of Argentina’s energy output and 3.8 percent of YPF’s activities in the Southern Cone nation.

In a ceremony Wednesday filled with nationalistic fervor, the governors of Chubut and Santa Cruz provinces said they were “revoking” the concessions because YPF has been lax in its investment and production. “We are tired of the policies that are being dictated from Spain that aim to take oil from our precious Patagonia,” said Santa Cruz governor Daniel Peralta at the rally, which was held in a remote location on the border of his province and Chubut.

Martín Buzzi, the Chubut governor, threatened to cancel more YPF concessions if Repsol “doesn’t do what it is supposed to do.”

YPF has 60 to 90 days to give back the oil fields.

Both Buzzi and Peralta are allies of President Cristina Fernández de Kirchner, who has been battling Repsol for weeks to increase production and reduce prices for consumers. Argentina is trying to cut costs on fuel imports while meeting an increased demand for energy. With the president’s backing, Buzzi had given YPF until Tuesday night to come up with a plan to raise output.

Energy Minister Soria said the decision did not come from Fernández de Kirchner

But YPF said that it has complied with all the “investment guidelines” under Argentinean law.

“In Chubut, there have been no interruptions in investment since 2009, and it has risen to more than $350 billion in 2011, representing a 236-percent increase during this period,” read a statement posted on the YPF website.

Officials also took a jab at Chubut, saying there are no “conditions for legal protection” in the province for YPF and its partners to operate under national law.

In Madrid, Industry, Energy and Tourism Minister José Manuel Soria downplayed any conflict between Spain and Argentina, and said that the decision was made at the provincial level and not by Fernández de Kirchner’s government.

Repsol officials have been engaged in heated discussions with Fernández de Kirchner in the past few weeks over energy supplies. Fears that the fiery Argentinean leader would nationalize the sector became so intense that King Juan Carlos reportedly called the president to discuss her plans.