Chevron, Argentina's YPF in $1.24-bn shale deal

US energy giant Chevron Corporation and Argentina's state-controlled oil company YPF SA have agreed to jointly develop shale gas and oil resources from the Vaca Muerta shale field in the Neuquen province at an initial cost of approximately $1.24 billion.

An agreement to this effect was signed yesterday by a Chevron subsidiary and YPF, the company that was seized by the Argentine government from Spanish oil and giant Repsol SA last year (See: Argentina renationalizes YPF; appoints new CEO). 

The first phase of the exploration programme envisages drilling 100 wells in a 5,000-acre area, which is part of a 96,000-acre concession in the Loma La Lata Norte and Loma Campana areas, Chevron said in a statement.

Chevron's vice chairman George Kirkland said, ''This strategic investment will allow Chevron to take part in the Vaca Muerta, one of the most exciting shale oil and gas plays in the world today,"

"It provides Chevron with a new opportunity to profitably grow production beyond our 2017 production target of 3.3 million barrels per day, Kirkland further stated."

The Vaca Muerta oil field is located in Neuquen in the central-western part of the country. It is an enormous oil and gas resource discovered by Repsol-YPF in 2010, with total reserves of over 27 billion barrels of technically recoverable oil and 802 trillion cubic feet of shale gas.

Thanks to these huge reserves, Argentina now occupies the fourth position  in the world in respect of recoverable shale oil after Russia, US and China and the second position in shale gas after China, according to latest EIA data.

The Loma La Lata field currently produces over 10,000 barrels of oil-equivalent per day.

Chevron's wholly-owned subsidiary Chevron Argentina SRL is the country's sixth-largest oil company. It currently produces around 21,000 barrels of crude oil per day and 4 million cubic feet of gas in the Neuquen Basin, where it holds operating interests ranging from 19 to 100 per cent.

"Chevron has a long history in Argentina, and this project demonstrates our commitment to the country, its economic development and its goal of achieving energy self-sufficiency," said Ali Moshiri, president, Chevron Africa-Latin America Exploration and Production.

Earlier in May, Chevron had said that it would invest up to $1.5 billion in the Vaca Muerta shale field.

On Monday, in a significant move to lure foreign investment in the country's energy sector, the Argentine government announced that it will allow oil companies to export up to 20 per cent of crude oil and natural gas they produce in the country and also relax some foreign exchange rules.

Sam Ramon, California-based Chevron is one of the world's leading integrated energy companies. The company explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and other energy products; manufactures and sells petrochemical products, besides other businesses.

It is believed that the Chevron's Argentine investment is part of company's portfolio evaluation and business prioritisation strategy announced earlier.

Last month, the company said that it would sell its interests in two oil mining blocks in Nigeria. (See: Chevron plans to sell two Nigerian oil blocks)