Argentina's YPF faces competitiveness challenges

Significance

The operation will take place under a government subsidy scheme that pays 7.50 dollars per barrel to exporters as long as the world oil price remains below 47.50 dollars. YPF is in the process of redefining its investment strategy which, since its renationalisation in 2012, has focused on the development of unconventional hydrocarbons resources.

Impacts

• Despite being Latin America's largest unconventional hydrocarbons producer, YPF will struggle to improve its competitiveness.
• The recent devaluation will provide only limited benefits in this respect.
• High domestic oil prices and the sharp tariff increase are unpopular and may prove unsustainable.