YPF & Chevron executives meet in Argentina for energy deal talks
By Taos Turner
BUENOS AIRES -- The CEO of YPF, Miguel Galuccio, is meeting with Ali Moshiri, President of Latin America and African operations at Chevron, in hopes of advancing an agreement to explore for unconventional oil and gas.
The executives are meeting in oil and gas rich Neuquen Province, in midwestern Argentina, where they will also meet up with Governor Jorge Sapag, according to a YPF official.
In December, the companies signed a preliminary deal to tap Neuquen's vast shale oil and shale gas resources. The agreement, which the companies initially hoped to close within four months, would help YPF boost oil output and give Chevron access to some of the world's largest unconventional oil and gas deposits.
Under the terms of original deal, the companies would spend about $1 billion to drill 100 wells in a 290 sq km area in the Vaca Muerta formation in Neuquen. The results of that pilot program would help the companies finalize plans to drill an estimated 2,000 wells for about $15 billion.
But the deal ran into trouble after a decade old legal dispute in Ecuador led an Argentine court to embargo up to $19 billion of Chevron's assets and income in Argentina.
The embargo stems from a legal battle involving claims that Chevron is responsible for environmental contamination in Ecuador. An Ecuadorian court ruled in favor of the plaintiffs in Ecuador, ultimately awarding them $19 billion.
Chevron denies the allegations and has said the ruling is based on fraudulent evidence. Plaintiffs have said that the fraud accusations are invalid.
Chevron doesn't have significant assets in Ecuador, so the plaintiffs have been trying to seize its assets in other countries to enforce settlement on the judgment.
The Argentine embargo order cited a treaty between Argentina and Ecuador that allows judges in one country to enforce court orders from the other country.
Though the embargo has been considered a major obstacle Chevron's plans with YPF, Mr. Galuccio recently said he is confident the parties can reach a deal within a couple of months. Mr. Galuccio told the Financial Times that the companies are "working on a different acquisition structure" that would allow them to proceed in Neuquen.
YPF is already producing shale oil in Neuquen. The company is currently producing an average of around 7 Mbbl, compared with around 4 Mbbl in early January 2013.
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