Chevron confident of continuing to phase 2 of Argentina shale project
BY SHANE ROMIG
BUENOS AIRES -- Chevron is optimistic it will move into a second phase of investment to develop Argentina's massive shale oil and gas deposits in tandem YPF.
If we get the right legislative support and support from the people, we're going to get to phase two sooner than expected, said Ali Moshiri, president of Chevron's Africa-Latin America Exploration and Production, at a press conference to explain its contract with YPF.
As part of the deal, Chevron will initially invest $1.24 billion in a pilot project to develop shale deposits in the famed Vaca Muerta, or "dead cow," formation in the arid Patagonian province of Neuquen.
The first phase of the agreement includes plans to drill more than 100 wells through 2014; a second program would entail drilling 1,500 wells in hopes to raising production to 50,000 barrels of oil and 3 MMcmd of natural gas a day.
The deal involves splitting investment costs and profits, with YPF retaining operating control, YPF CEO Miguel Galuccio said.
The companies are expected to wrap up the first phase of investment in 10 to 12 months, according to YPF.
The deal gives Chevron a foothold in a region that one day could be a major source of unconventional oil and gas.
Argentina ranks second in the world, behind China, in potentially recoverable shale-gas reserves, with 802 Tcf, according to a June study by the United States Energy Information Administration. Argentina also ranks fourth in shale oil with an estimated 27 Bbbl.
Argentina recently announced a package of incentives to lure oil and gas investors.
Companies investing at least $1 billion will eventually be allowed to sell 20% of their production abroad without paying export taxes. They will also be able to keep related profits.
However, many companies have faced political and legal instability in Argentina, in addition to frequent changes to laws and regulations which have spooked investment.
President Cristina Kirchner expropriated a 51% stake in YPF from Spain's Repsol just over a year ago in a dispute over investment and declining production.
Our business is to go where the resources are and Chevron has balanced the risks against the potential resources, Mr. Moshiri said. "We're already in Argentina and we want to grow here."
Dow Jones Newswires