Argentina Seeks To Jump-Start Shale Drilling With Repsol Deal

Argentina Seeks To Jump-Start Shale Drilling With Repsol Deal

Reuters

BUENOS AIRES, Nov 26 (Reuters) - Argentina said on Tuesday that a pending deal with Spanish oil major Repsol is aimed at kick-starting shale drilling in the South American country, putting an end to the long stand-off between energy investors and President Cristina Fernandez.

Nineteen months after seizing control of Argentina's main oil company YPF from Repsol, Fernandez's government announced a preliminary deal late on Monday to pay Repsol for its nationalized shares.

Shares of both companies soared on reports that the pact involved a proposal by Spain's government that Repsol receive $5 billion in compensation from the Argentine state for the 51 percent stake it grabbed in YPF last year.

The deal could set the stage for a radical increase in unconventional energy exploration and help repair a relationship with global investors left in tatters after Argentina's massive 2002 sovereign default.

Tapping its vast shale reserves would also bolster central bank reserves drained in part by expensive oil and gas imports.

The Repsol deal showed new flexibility on the part of Fernandez, whose policy model, marked by long-running feuds with private-sector investors from farmers to sovereign bondholders, was rejected by voters who shunned her candidates in the Oct. 27 congressional midterm election.

Early on Tuesday, Argentina's new cabinet chief Jorge Capitanich, himself a possible 2015 presidential candidate, said the government was out to attract investment in the country's massive Vaca Muerta shale oil and gas formation.


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