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Shell considering sale of Argentine assets

 

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Thursday, September 8, 2016

Energy giant Royal Dutch Shell is evaluating whether to sell part of its assets in Argentina, the company said yesterday.

According to Executive President Ben van Beurden, refineries, transporting and distribution assets in the country could be put up for sale as part of a massive global disvestment programme worth an estimate US$30 billion. The move amounts to a massive revision of the firm’s “downstream” services, van Beurden said during a conference in New York.

Upstream operations — meaning the exploration and production of oil and gas — in the country will remain untouched, however, a spokesman for the firm clarified later.

“Our upstream interests and their related assets in Argentina are outside the reach of our strategic revision,” Shell said.

“Since the year 2020, we consider our global investment in shale energy as a priority for growth and thus decided to develop and grow our non-conventional energy businesses in Argentina in the coming years,” the company added.

In a press release, Shell clarified that it had “no intention of its losing presence” in the country, and limited the scope of the potential selloff. “A revision of our downstream portfolio means an evaluation of our model and its assets in the country,” but “Shell has a strong commitment to Argentina, where we have more than 100 years of history.”

Shell has won the rights to explore some parts of the Vaca Muerta region in Neuquén province, known for its abundance of unconventional gas and oil resources, and could even increase its business there if the government’s policy of opening exploration to private firms continues.

In June, at the first presentation of its long-term business strategy since the US$54-billion purchase of the firm BG in February, Shell unveiled plans to limit expenses and close plants in some countries to focus on its more profitable operations, mainly natural gas, deep water drilling and chemicals.

On that occasion, van Beurden said he expected that the future cuts they were planning would help boost the value of Shell’s paper at the stock market, after they were left behind — when compared to their rivals in the sector — since the BG purchase was announced last year.

Shell’s downstream assets in Argentina include a refinery in Buenos Aires, roughly 600 petrol stations, trading, supply and other businesses focused on chemicals, propane, lubricants and aviation fuel, among others.

Shell’s service stations, a key part of its downtream business, represent 18 percent of the Argentine market, according to figures provided by the firm in 2014, with state-controlled YPF the dominant player in the sector.

A firm in the public eye

Locally, Shell has been in the public eye lately due to the growing political presence of its former head in the country, Energy Minister Juan José Aranguren.

Aranguren was one of the most prominent critics of the previous administration in the business sector, and Shell clashed with the Kirchnerite government on several occasions. He then joined the Let’s Change coalition as a key adviser and ended up being named as a key figure in President Mauricio Macri’s cabinet following his presidential victory in November.

Since then, Aranguren has been in charge of the much-criticized hikes to utility rates, in a bid to reduce the costs of state subsidies and raise money for improved infrastructure.

But the minister’s continued ownership of Shell shares has led to questions regarding potential conflicts of interests between his current job and his previous one. Opposition lawmakers have said the new rates, as well as some auctions for energy imports which Shell won, have benefitted the firm in which he still holds shares.

Aranguren speaks

After weeks in the public eye due to the legal back and forths regarding the rate hikes, Aranguren continues to be a prominent presence in politics and media, yesterday speaking on a wide range of topics and defending the latest restructuring of natural gas prices after the Supreme Court struck down the original increases, as well as anticipating potential power cuts in the summer.

The Energy Minister said yesterday that electricity services could face trouble “depending on the temperature,” although adding that “a maintenance programme is underway in order to get to December in the best possible shape.”

The government has argued that one of the reasons the increases to utility rate hikes are necessary is to finance the improvement of decayed infrastructure across the country, which has caused powercuts in previous summers, when distribution systems are tested to the max.

Yesterday, despite cold temperatures, some small areas in the city were without electricity.

Aranguren also spoke about gas hikes yesterday, saying that he would be open to new suggestions when the mandatory public hearings take place next week, but that the basic rates scheme would be the one announced earlier this week, with 203-percent increases on average for residential users, and a 500-percent cap for commercial users.

Herald staff with DyN, Reuters

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