After resorting to every judicial machination possible, state-run oil company YPF finally ran out of legal options to avoid handing over to the courts all the documents regarding a 2013 deal it sealed with US energy giant Chevron and will have to do so this week.
The agreement, signed in 2013 between the country’s largest oil company and Chevron to explore and produce shale oil in the Vaca Muerta formation in Neuquén province, was mired in controversy from the start. YPF portrayed it as a victory for the company that the state had partially nationalized the previous year but there was soon talk of secret clauses, particularly fomented by Socialist Party (PS) Senator Rubén Giustiniani.
The whole thing has also emerged as an example of shifting political interests as President Mauricio Macri’s administration did a 180 after taking office, going from vocally advocating for the clauses to be made public to justifying their continued secrecy.
The exact day this disclosure will now happen is far from clear. While Clarín reported it will be tomorrow, Infobae claims it will happen on Thursday. What’s clear is that the government didn’t have many (any) alternatives left. During these past years several courts, including the Supreme Court, agreed with Giustiniani’s request to access the documents, specifically the clauses concerning the environmental impact of the investment that could amount to a whopping US$16 billion.
YPF repeatedly argued it couldn’t disclose the entire contract because, like any contract between two companies, included industry secrets and other confidential details that could affect the company’s position in the international markets if made public.
Selected leaks, however, have pointed out that some of these allegedly “secret” clauses had to do with economic and legal benefits for Chevron in exchange for its large investment in Argentina at a time when many international companies were not eager to invest here. No clause specifically relating to environmental issues has been disclosed so far, but we’ll have to see if this changes once the entire contract comes to light.
Since YPF is majority owned by the state, the courts have repeatedly said it must let the public access information regarding its activities, which “are a matter of public interest.” YPF, for its part, contends that it would be prevented from sealing future contracts if it is forced to make so much information public.
Giustiniani insists he has no intention of hurting YPF. His request, he says, seeks to “not repeat mistakes that led [the company] to act with a lack of transparency, especially when it concerns the future of Vaca Muerta, the world’s second-largest reserve of shale gas and fourth-largest shale oil reserve.”
A Controversial Deal
Ever since the deal was signed, the secrecy was such that even then-Neuquén Governor Jorge Sapag acknowledged he didn’t have access to some of the agreement’s details.
Prior to these latest sentences, the courts justified the companies’ refusal to reveal their agreement’s details by citing a law that exempts companies such as YPF from doing so.
Whenever consulted on the subject, now former YPF CEO Miguel Galuccio claimed the secret clauses weren’t actually “secret clauses,” but “confidential items that are due to the fact that [YPF and Chevron] are two private companies that trade in the market.”
However, different journalistic investigations revealed a number of clauses over time. The New York Times revealed one in October 2013, Infobae three in August 2014 and La Nación did its thing with one more in November of that same year.
- “The deal would shield the American company from financial loss connected to a change in the political winds. After the company invests US $1.2 billion, 18 months later it can withdraw from operations without penalty and continue to receive net profits of 50 percent of the production from the initial wells in perpetuity,” the U.S. outlet explained.
- New York law would rule over any dispute or contract infringement, instead of Argentine law.
- In case of conflict, the International Court of Arbitrage of the International Chamber of Commerce would have jurisdiction in the case again, instead of of Argentine courts.
YPF would deposit US$100 million in a US bank as a guarantee.
- Chevron had insisted that certain local and federal laws be changed “to its satisfaction” as an additional condition to signing the agreement. Only then would it start investing in the country. According to La Nación, these demands, which haven’t been fully described, were accorded via a presidential decree, a new law in Neuquén and the so-called Hydrocarbon Law sanctioned by Congress in 2014.
When asked about whether the report was true or not, YPF executive Fernando Giliberti confirmed the second and third clauses’ veracity. Galluccio was cryptic about the fourth: “Guarantee clauses were established, as per usual,” he said. YPF has long contended none of these clauses were actually secret and it had even discussed some of them in public, but obviously these details get lost in the bigger picture.
The Macri administration’s 180
Laura Alonso, now the director of the Anti-Corruption Office, was one of the staunchest critics of the “secret” clauses and vocally opposed the previous administration for allowing them to remain secret.
Tomemos dimensión de la importancia del fallo de la Corte sobre YPF-Chevron. Caen las caretas de la hipocresía K #ElFraudeEsElRelato
— @lauritalonso (@lauritalonso) November 10, 2015
That, however, was when she was a member from the opposition. Once she got access to said clauses and met with Galuccio, she began to justify their secrecy as well.
“I wasn’t misinformed, I just didn’t have enough information. But I read up on it afterward and changed my mind,” Alonso explained in an interview in March.
Predictably, this anything but subtle flip-flop blew up in both her and the Macri administration’s face, causing Alonso to be widely criticized by those who still believe the documents should be disclosed: “It doesn’t seem republican to me that someone should refuse to show a contract,” said Elisa “Lilita” Carrió, a firebrand lawmaker who is a member of Macri’s ruling coalition. We’ll see who was right after all later this week. Stay tuned.