Nationalisation plan scuppers China deal

Argentina’s move to nationalise local oil company YPF, controlled by Spain’s Repsol, has scuppered years of planning by China’s Sinopec Group to buy the South American company, sources said.

Bankers said China’s second-largest oil company had held talks with Repsol to buy its controlling 57 per cent stake in YPF. Chinese website Caixin.com cited a source as saying Sinopec had reached a non-binding agreement to take over YPF for more than £9bn.

But plans by Argentine President Cristina Fernandez to seize control of YPF, which have incensed Spain and sparked international criticism, have killed any hopes that state-owned China Petrochemical Corp (Sinopec) could seal a deal, they said.

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“It’s too hairy for any Chinese major to put in that much money, unless there is a special relationship with the Argentinean government, which I doubt,” said a mergers and acquisitions banker, who has advised Chinese state-run oil companies on overseas acquisitions.

“This is a challenging situation for anybody given the government action. To me it looks like political suicide to now allow a Chinese company to own YPF soon after announcing the nationalisation. I don’t think they can go flipflop like that.”

Bankers said Sinopec’s interest in YPF went back at least five years.

The Caixin.com report said Sinopec was in talks with Repsol to buy YPF despite the nationalisation threat and the Financial Times said Repsol had not informed Argentina of the discussions with the Chinese oil firm.

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Sinopec declined to comment. “We don’t comment on market rumours,” Sinopec Group spokesman Huang Wensheng said. YPF has been under intense pressure from Fernandez’s centre-left government to boost production and its share price has plunged due to months of speculation about a state takeover.

Caixin.com’s report said Sinopec believed YPF’s oil blocks in Argentina hold large development potential and it was confident it could meet the Argentine government’s requirements to accelerate development and production.

Repsol vhairman Antonio Brufau declined to comment on the Sinopec interest in YPF.

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