Argentina's YPF CEO Says Talks with Shale Partners 'Advanced'

Argentine state oil company YPF SA (YPF) is in advanced discussions with potential partners on the development of its shale assets, the company's chief executive said Friday.

YPF could complete a deal with Bridas Energy Holdings Ltd. before the end of the year, while an agreement with U.S. oil major Chevron Corp. (CVX) will likely close in the first quarter of 2013, he said, adding that the deals would likely be similar in size.

"With both Bridas and Chevron we are already quite advanced," YPF CEO Miguel Galuccio said at a seminar in London.

Chevron signed a memorandum of understanding with YPF in September to explore for unconventional energy in Argentina.

However, earlier this month, Spanish oil company Repsol SA (REPYY, REP.MC) filed a suit in New York federal court attempting to block Chevron from teaming up with YPF in Argentina due to Argentina's nationalization of Repsol's controlling stake in YPF earlier this year. Argentina accused Repsol of failing to invest and bleeding the company dry with dividends.

Declining oil and gas output last year turned Argentina into a net energy importer for the first time in almost 20 years.

On Friday, Mr. Galuccio said he was confident that legal issues would not stand in the way of any agreement between the company and Chevron.

"There is no claim Repsol can make that can freeze the development of YPF per se ... We are not concerned and I think Chevron is probably less concerned than us, otherwise they wouldn't be investing in us," he said.

In addition, on Monday Repsol filed a case against Argentina at the World Bank's arbitration tribunal, known as Icsid.

Argentina is also seeking to team up with Bridas Energy Holdings, which runs Argentina's Pan American Energy and is the country's No. 2 oil and gas company.

Bridas is jointly owned by Argentina's Bulgheroni family, through Bridas Energy Holdings, and China's Cnooc Ltd. (CEO, 0883.HK).

Argentina is currently on a major investment drive to develop what could be massive unconventional oil and gas deposits.

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 last year by the U.S. Energy Information Administration.

The Vaca Muerta shale formation in the Neuquen basin holds an estimated 23 billion barrels of oil equivalent.

In addition to seeking partners, YPF is actively on the hunt for financing.

YPF could seek to raise between $300 million and $500 million on international bond markets as early as next year, Mr. Galuccio said Friday.

"If the conditions are right we will go out with an international bond towards the middle of the year," he said.

YPF has plans to invest $7 billion per year between 2013 and 2017.

Mr. Galuccio said recently that YPF can invest $24.7 billion from its own pocket through 2017, with that investment rising to $40.4 billion if the company can ink joint ventures.

Last week, the government more than tripled the price that YPF can charge for new natural gas production to ensure it is profitable to invest in gas production.

The new price, $7.50 per million British thermal units, is well above the benchmark natural gas price of $3.65 in the U.S.


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