BUENOS AIRES, Argentina (AP) — Argentina's cash-strapped state energy company signed a partnership deal Wednesday with Chevron Corp. for a "massive development" of the South American country's vast nonconventional oil and gas resources.
YPF President Miguel Galuccio and Chevron's Latin America and Africa chief, Ali Moshiri, signed a letter of intent to start on a shale pilot project by drilling more than 100 wells within 12 months in the Vaca Muerta area of Patagonia. YPF hopes the effort will help it boost production to meet Argentina's growing energy demands.
The companies said the pilot project will cost a shared $1 billion, while it could take more than $15 billion for full development of the Vaca Muerta ("Dead Cow") formation that was discovered in Neuquen province in 2010.
Argentina expropriated a majority stake in YPF from Spain's Grupo Repsol in April after accusing the Spanish company of bleeding YPF dry and forcing Argentina to import record amounts of energy by failing to invest in Argentine operations.
Galuccio, who was picked by President Cristina Fernandez to lead YPF shortly after the company was nationalized, said he was delighted by the agreement with Chevron. Since taking charge, Galuccio had insisted on the need for YPF to find wealthy partners willing to make long-term bets on developing Argentina's energy potential.
The preliminary accord is key to YPF's plans to develop what experts believe are the third-largest shale resources in the world and boost the company's output, which dwindled under the control of Repsol.
Argentina needs billions of dollars to exploit its energy reserves, and until now major oil companies had failed to commit. Analysts blamed the government's heavy hand in the market and Repsol's threat to sue any partner for the $10 billion investment that Argentina seized when it took over YPF.
"YPF is top-notch when it comes to technology and human resources," Chevron's Moshiri told reporters in Buenos Aires via a teleconference.
"The issue will be how big the investment will be beyond the pilot," Moshiri said, adding that the companies plan to begin work as soon as possible.
He said the partnership will serve as a foundation for the development of nonconventional oil and natural gas resources and other interesting investments in Argentina.