Chinese Oil Firms Bid for Repsol’s Argentine unit

Chinese oil conglomerates China National Petroleum and Cnooc have offered to pay an estimated $17 billion usd for all of Repsol YPF’s state in its Argentine unit called YPF.

You can read the Wall Street Journal’s paraphrased article (the original costs money) at thestreet.com, by visiting this article.

Will this deal actually be completed? China South America reported on this possible deal back on July 7, 2009. You will notice, the offer at this point was only $14.5 billion for a 75% stake. China has since upped the offer and is now looking to buy the entire thing.

Why China? Are you angry over Australia rejecting your Rio bid? Are you feeling flustered that countries from the industrialized world, but also in Africa and Latin America are starting to think twice about selling the rights to their raw materials?

I don’t blame them, after all, Australia is quite similar to South American commodity producing countries. Two note worthy and simple similarities include

1. A large portion of GDP is generated from commodity exports
2. The relative strength or weakness of domestic currencies such as the Ausie Dollar, Argentine Peso, Peruvian Sol and Brazilian Real, are all inherently linked to the global market price of the commodities the countries export. [ie: if the spot price for copper drops 50%, observe what happens to Peru and Chile’s Peso’s.

According to the WSJ article, the main obstacles to this deal include

• Spain is hesitant to see some of its best assets in Argentina be sold to China

• Argentina’s government has no financial stake in YPF, but nonetheless under Argentine law has the right to veto decisions such as transfer of ownership. In my personal opinion, this translates into who is willing to pay more “under the table” to the Argentine government.

• China National Petroleum and Cnooc are state owned organizations. Despite their growing influence and presence in oil markets around the world, many governments still remain weary of doing business with companies officially tied to a foreign government.

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China to buy Repsol Assets in Argentina – Update

[China – Argentina – Spain]

China’s CNPC said offering $14.5 billion for Repsol investment – Market Watch

SAN FRANCISCO (MarketWatch) — China National Petroleum Corp. has offered up to $14.5 billion for a majority stake in the Argentine unit of Spanish oil company Repsol YPF SA, according to media reports published on Tuesday.

The South China Morning Post, citing unnamed sources, reported that CNPC has offered between $13.2 billion and $14.5 billion for a 75% stake in the unit.

Dow Jones Newswires reported that Repsol said last week that it had received proposals from a number of companies for a stake in the unit.

China has been acquiring energy assets as its growing economy demands more resources to support its needs.

Sinopec has also secured a deal with Brazilian firm Petrobras (PEFGF) to supply it with 150,000 barrels of crude a day this year, and 200,000 barrels per day for nine years starting in 2010, according to the state-run China Daily.

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Argentina and Spanish oil giant Repsol still thinking…

[China – Argentina – Spain]

Pretty good Wall Street Journal articles hit the presses in NYC today relating to the topic of Repsol selling their assets in Argentina to China

CNOOC Says Interested In Cooperation, Not Takeovers – EFE

Argentina Still Weighs on Repsol

Repsol is playing down speculation about unloading some of its 85% stake in Argentinian oil business YPF. But shareholders must hope a deal materializes, and soon. Apart from its exposure to Argentina’s political and economic risks, YPF ties up capital that Repsol could use to develop large recent Brazilian oil discoveries.

Unfortunately, what makes it wise for Repsol to sell YPF may deter potential buyers. YPF’s reserves are declining. Buenos Aires has to approve any share sale, while Repsol has committed to keep at least a 50.1% stake until 2012.

YPF also has to satisfy domestic oil demand — where prices are capped — before it can export, paying a punitive export tax. Chinese suitors, in particular, will likely bridle at such restrictions.

Click here, or the links above to view the complete articles from the WSJ

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