ARGENTINA'S OIL FIELD PRIVATIZATION TAINTED BY FRAUD CLAIMS

Argentina's ambitious program to privatize a significant portion of its oil production operations remains under a cloud. Argentine Federal Judge Nestor Biondi Apr. 3 ordered the seizure of documents at the headquarters of state oil company Yacimientos Petroliferos Fiscales to investigate allegations of irregularities in the program. Argentina is offering four major oil producing areas with combined crude reserves estimated at 256 million bbl under its next tender (OGJ, Jan. 14, p. 51).

April 15, 1991

2 min read

Argentina's ambitious program to privatize a significant portion of its oil production operations remains under a cloud.

Argentine Federal Judge Nestor Biondi Apr. 3 ordered the seizure of documents at the headquarters of state oil company Yacimientos Petroliferos Fiscales to investigate allegations of irregularities in the program.

Argentina is offering four major oil producing areas with combined crude reserves estimated at 256 million bbl under its next tender (OGJ, Jan. 14, p. 51).

The accusations were made by Congressman Jose Ramos, who heads a group of eight dissident members of the ruling Peronist party.

Luis Prol, Energy Ministry undersecretary for fuels, said, "We are sure we are doing everything correctly despite the multiplicity of interests in boycotting the privatization process" under YPF Pres. Jose Estenssoro.

The seizure was ordered after Estenssoro refused to provide the congressmen with details of the cost of a Gaffney & Cline reserves study.

Biondi will hear testimony from YPF geologists and management before reaching a decision.

ALLEGATIONS

Ramos alleged YPF underestimated by 43.8 million bbl oil reserves identified by consultants Gaffney & Cline in four key areas up for tender and accused Estenssoro of fraudulent administration.

His group also called for an immediate halt to the international tender process.

A request also has come from Jose Bordon, Mendoza provincial governor, to the Supreme Court calling for cancellation of awards of producing areas in his province to Spain's Repsol SA and Argentina's Astra.

However, Argentina President Carlos Saul Menem said both of the contracts would remain in effect.

Further, the Ramos group claims Pro] did not pay the provinces 10% of the value of privatization contracts as required by federal law. Antonio Cassia, head of the congressional energy commission, supported that claim.

ECONOMIC CONCERNS

Economy Ministry officials voiced concern that if the Supreme Court upholds the Ramos group claims, the government could lose as much as $100 million.

One of the key points in Argentina's negotiations with international lending institutions is an acceptance that revenues from privatization go to the Central Bank to pay down foreign debt and not be deposited in the Treasury.

The Economic Ministry thus considers privatization revenues to be important in Argentina's economic stabilization program and efforts to boost the exchange rate on the austral to 10,000:$l (U.S.).