BUENOS AIRES - Argentina's largest oil and gas producer, state-run YPF SA, and Chevron Corp. moved closer Wednesday to finalizing an agreement that would see the U.S. energy company invest $1.5 billion to develop shale oil deposits in the South American country.
Chevron's pledge to invest in Argentine shale oil with YPF was first announced amid great fanfare last December. For YPF, it marked the first tangible sign that a major foreign oil company was willing to put big money in Argentina less than nine months after President Cristina Kirchner expropriated a 51% stake in YPF from Spain's Repsol SA.
But the deal soon ran afoul of Chevron's decades-old legal dispute over pollution in Ecuador. Ecuadorian courts have ordered Chevron to pay $19 billion, and last year an Argentine judge slapped an embargo for that amount on Chevron's assets and income in Argentina at the behest of Ecuadorian plaintiffs in the case.
After five months of talks, YPF's Chief Executive Miguel Galuccio and Ali Moshiri, Chevron's president of its Latin America and African operations, signed an accord outlining the as yet undisclosed commercial terms and conditions of their partnership, YPF said in a statement.
YPF expects the final agreement to be signed this July.
Chevron is expected to invest $1.5 billion in a pilot program aimed at developing shale oil deposits in the famed Vaca Muerta formation in Neuquen Province, YPF said.
The complete development of the first cluster of shale oil wells subject to the agreement will require investments of more than $15 billion, YPF said.
YPF is already producing about 7,000 barrels a day of shale oil in Neuquen, up from 4,000 day in early January.
Argentina ranks third in the world, behind China and the U.S., in potentially recoverable shale-gas reserves, with 774 trillion cubic feet, according to a study by the U.S. Energy Information Administration. Argentina is also thought to be home to vast quantities of shale oil.
Copyright (c) 2012 Dow Jones & Company, Inc.
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