The oil industry has recently produced two great examples for those suffering from optimism, naivety, or amnesia. The meddlesome world of energy is something that you can throw any old cliché at and it will surely stick.
To begin with Angola, where the Goldman Sachs-backed Cobalt International Energy is very surprised that local officials are shareholders in its Angolan JV partner, Nazaki. Extensive due diligence has apparently:
And on to the second conveniently forgotten maxim - a South America country will always fall victim to a mad populist leader, ultimately wreaking havoc on the economy and, more importantly, the reputation of that country.
To whit, Argentina's nationalisation of YPF oil by the government of President Cristina Fernández has now turned into a major diplomatic incident. Spain's Repsol was until yesterday a 57% shareholder in YPF, with the stake accounting for 25% of Repsol's operating income and 33% of its total investment. Apparently the Argentine government was fed up with the pace of development of YPF's assets, despite the discovery of a 22bn barrel shale gas and oil discovery offshore at Vaca Muerta.
Argentina's failed energy policy, which sets prices far below international levels, naturally escaped any blame. If the government liberalised energy markets, and removed subsidies that swell its deficit, they might have better convinced Repsol and YPF to rebalance the 90% dividend payout ratio towards more investment. The Spanish government is rightly incensed and lawsuits through any and every jurisdiction will now surely ensue.
Still locked out of international bond markets, enquiring minds would like to now just how Argentina intends to raise the $25 billion per year that developing the Vaca Muerta field requires. As the FT's Lex said:
To begin with Angola, where the Goldman Sachs-backed Cobalt International Energy is very surprised that local officials are shareholders in its Angolan JV partner, Nazaki. Extensive due diligence has apparently:
“not found any credible support for [the] central allegation that Angolan government officials, and specifically the officials identified ... have any ownership in Nazaki”I'm not sure how Cobalt failed to discover what the Financial Times and presumably at least one US investigative authority managed to find, but time will tell. Even if Cobalt are surprised, you shouldn't be - looking after the generals in Angola is sine qua non. Indeed, from the legislated Black Economic Empowerment in South Africa to "common law" corruption in other African countries, some form of private transfer payment to government or well-connected locals is expected.
And on to the second conveniently forgotten maxim - a South America country will always fall victim to a mad populist leader, ultimately wreaking havoc on the economy and, more importantly, the reputation of that country.
To whit, Argentina's nationalisation of YPF oil by the government of President Cristina Fernández has now turned into a major diplomatic incident. Spain's Repsol was until yesterday a 57% shareholder in YPF, with the stake accounting for 25% of Repsol's operating income and 33% of its total investment. Apparently the Argentine government was fed up with the pace of development of YPF's assets, despite the discovery of a 22bn barrel shale gas and oil discovery offshore at Vaca Muerta.
Argentina's failed energy policy, which sets prices far below international levels, naturally escaped any blame. If the government liberalised energy markets, and removed subsidies that swell its deficit, they might have better convinced Repsol and YPF to rebalance the 90% dividend payout ratio towards more investment. The Spanish government is rightly incensed and lawsuits through any and every jurisdiction will now surely ensue.
Still locked out of international bond markets, enquiring minds would like to now just how Argentina intends to raise the $25 billion per year that developing the Vaca Muerta field requires. As the FT's Lex said:
"Argentina can kiss goodbye being treated seriously again by investors for another generation."Still surprised?
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