By CLIFFORD KRAUSS

          BUENOS AIRES, Argentina -- For decades after its founding in
          1922 as the world's first state-owned oil company outside the
          Soviet Union, Yacimientos Petroliferos Fiscales was the butt of one of
          Argentina's most enduring jokes as "the only oil company in the world
          that knew how to lose money."

          Executives were chosen for their loyalty to a series of military dictators,
          even if they did not know the difference between crude and kerosene. It
          didn't matter: the union made key management decisions anyway.
          Meanwhile the rest of the government's agencies, including the railroad
          and gas distribution company, balanced their books by neglecting to pay
          their fuel bills.

          But Argentina's oil company is no longer a joke. It was privatized
          between 1990 and 1993 in an overhaul that cut the payroll of YPF,
          as it is widely known here, from 50,000 to fewer than 10,000
          employees. The company sold off marginal fields, got rid of a rickety
          tanker fleet, and dumped useless movie theaters and money-losing
          hospitals that had nothing to do with its basic business. It introduced an array
          of cost controls and employee incentives.

          YPF, leaner if not meaner, has since catapulted itself into the second tier of
          world energy companies by acquiring exploration fields, gas stations and
          pipelines in the most unlikely places, from Peru to Indonesia to the Texas
          panhandle.

          "We now act like an American company," said Roberto Monti, the
          company's chairman, who spent most of his career at Schlumberger, the
          global oilfield services giant based in Paris.

          YPF is already the largest private oil company in Latin America and the
          largest private company of any kind in Argentina -- representing better
          than 20 percent of the total market capitalization of the local Merval
          stock exchange. It is among the most actively traded Latin American
          companies on the New York Stock Exchange, with 51 percent of its
          stock controlled by institutional holders.

          Now the company, with its $11 billion in market capitalization, is poised
          to take advantage of the expected privatization and selloff of the Brazilian
          government's energy holdings and the continuing opening of Venezuela's
          huge oil patch in the next few years. Consequently, Wall Street analysts
          say, the blue and white YPF logo should cast an ever wider shadow in
          the years to come. A huge billboard over a YPF filling station on Avenida
          Libertador in Buenos Aires trumpets a new company slogan: "YPF: Here
          and Everywhere."

          That is, unless YPF is acquired first, making the trophy seeker a trophy
          itself. "YPF could be bought by Repsol today or by Shell tomorrow,"
          said a senior Argentine oil executive who spoke on the condition he not
          be identified.

          The Spanish oil company Repsol, another formerly state-owned concern
          beginning to expand its repertoire on the world stage, became the largest
          YPF shareholder in January when it bought a 14.99 percent stake in the
          company from the Argentine government at a premium price of $2 billion.

          Repsol's purchase at $38 a share raised eyebrows in the investment
          community because no other company would bid anywhere near that
          level: the price was about $10 a share higher than the market quote at the
          time. But over the last two months, with Latin American stock markets
          and the international oil price beginning to recover, YPF's shares have
          risen to $32.95, up about 18 percent for the year.

          If Repsol acquired YPF, the merged company would be the
          eighth-largest integrated oil company in the world as measured by asset
          value. But Repsol's takeover prospects appear increasingly unlikely since
          YPF's bylaws prohibit a stock swap. Raising the necessary cash would
          not be easy. Moreover, many analysts say the Spanish company
          underestimated the spirited resistance the YPF board would put up to
          avoid being caught up in the consolidation trends that have seized the
          international oil industry. Under pressure from relatively low prices, even
          such giants as Exxon and Mobil and British Petroleum and Amoco have
          agreed to merge.

          "I have mixed feelings when we talk about consolidation," Monti said in
          an interview. "Size can impede speed to react. What we are looking for
          is YPF to be one of those dynamic companies, one that can make use of
          opportunities faster than anybody else."

          At age 60, Monti is a dour man who goes to bed at 10 p.m. so he can
          get to the office before 8 a.m. He is so precise about scheduling he is
          known to cancel appointments with people who are five minutes late.
          Monti would speak little about the proposed Repsol takeover beyond
          saying, "You are better off being the owner of your own destiny."
          Associates say he thinks YPF would be better off with another partner --
          a junior one.

          Monti described himself as a collector, one who has assembled a
          collection of 60,000 stamps from every corner of the world since his
          childhood. At age 40, he bought a 1929 Chevrolet Phaeton and over the
          last 20 years he has acquired a slew of vintage cars including a Jaguar, a
          Mercedes-Benz and a Porsche.

          He said his internationalist collections say a lot about his personality and
          the way he views YPF. "I know my way abroad," he said. "Two years
          ago we were not exporting any gas. Now we are exporting to the south
          of Chile and to the Santiago area. We were importing gas from Bolivia,
          now we are going to reverse the flow and send it Brazil via Bolivia. We
          are going to Uruguay and from there extend to Porto Alegre and Sao
          Paulo."

          Monti said he intended to continue to dominate the Argentine market:
          YPF controls nearly 50 percent of Argentina's production of 908,000
          barrels a day (the country ranks 21st among oil producers) and operates
          almost half of Argentina's 6,000 filling stations. But the core of his
          strategy for growth is expansion abroad, particularly into the growing
          neighboring markets of Brazil and Chile.

          From virtually no foreign operations only four years ago, YPF now has
          17.5 percent of its 3.2 billion barrels in reserves and 16.4 percent of its
          production outside Argentina. More than 38 percent of its $5.5 billion in
          revenues in 1998 came from exports or operations in other countries,
          while a honeycomb of gas pipelines reaching into Chile, Uruguay,
          Paraguay, Bolivia and Brazil are under construction.

          YPF's push abroad began in earnest in 1995, when it spent $1.7 billion
          to buy Maxus, an independent exploration and production company with
          50 percent of its properties in Indonesia. It also has a joint gas venture in
          the Texas panhandle with BP Amoco. (YPF has a 65 percent interest in
          a field that yielded 144,000 cubic feet of gas a day in 1997.) The
          acquisition of Maxus originally received negative reviews from
          international investors because of the company's history of cost overruns
          and debt, but that has changed as YPF improved its operations.

          Monti said his concept of targeted, measured growth was designed to
          raise the return on capital from just below 11 percent when he took over
          the company in 1997 to 15 percent by 2002. Last year he reached 13.2
          percent -- just above the current standard for international oil companies
          -- even as oil prices and revenues dropped.

          The company reported net operating income in the final quarter of 1998
          ending in December of $115 million, or 33 cents a share, a decrease of
          42.5 percent from the corresponding period in 1997. But Wall Street
          analysts said results would have been far worse had the company not
          reduced exploration and production costs by as much as 30 percent over
          the last two years, and they are predicting that considerably higher profits
          will come with higher oil prices.

          Dario Lizzano, head of Santander Investment's equity research team in
          Buenos Aires, said one yardstick for YPF's improved operations was
          that while the company needed an international price of $11 a barrel of
          oil to break even in 1995, it only needs a price of $7 a barrel to break
          even this year. "They have done an outstanding job," he said.

          With the help of two management advisers contracted from Chevron and
          a $56 million modernization project, for instance, YPF's largest refinery
          in La Plata has decreased the cost of processing a barrel of oil from
          $4.69 to $2.66 a barrel since 1995, according to management. A tour of
          the 1,000-acre operation leaves a visitor with a strange sensation akin to
          visiting a ghost town of flare towers and storage barrels. Only 690
          employees work there (over several shifts 24 hours a day), down from
          1,350 at the time the company was privatized.

          "In the past YPF knew how to meet production targets but had no idea
          about efficiencies," said Abraham Zarzur, director of the La Plata refinery
          and a holdover from the pre-privatization days. "Now we make money,
          lots of money."