Wednesday, July 17th 2013 - 07:24 UTC

Argentina’s nationalized YPF and Chevron sign agreement to develop shale deposits

Chevron, the world’s second-biggest oil company signed the first agreement with Argentina’s government since it nationalized YPF in 2012 to help develop shale oil and natural gas in the Vaca Muerta basin of the Patagonian province of Neuquen.

The top executives from Chevron and YPF later in the evening met with President Cristina Fernandez

John Watson, Chevron’s chairman and chief executive officer, and YPF CEO Miguel Galuccio signed the accord on Tuesday at YPF headquarters in Buenos Aires to develop the world’s second-largest shale gas deposit and fourth-largest shale oil reservoir. The contract finalizes terms for Chevron’s initial 1.24 billion dollars investment, which may reach as much as 15 billion. The partnership was first formed in December.

“Vaca Muerta is a world-class asset and fits perfectly in our strong portfolio of unconventional resources” Watson said in a statement e-mailed by YPF. “It is consistent with our strategic objective to enter attractive new areas early in the process.”

Argentine President Cristina Fernandez’ government seized a 51% stake in YPF from Spain’s Repsol in April 2012 to stem fuel imports that doubled to 9.4 billion in 2011 and are expected to rise to as much as 15 billion this year. Argentina said it will offer energy companies incentives if they invest 1 billion dollars or more over a five-year period.

The first phase of the venture between Chevron and YPF calls for drilling 100 wells in a 5,000-acre tract. Daily production is forecast to be 50,000 barrels of oil and 3 million cubic meters of gas by 2017, they said in an Argentine regulatory filing. The companies will be 50-50 partners in the second stage, which requires drilling 1,500 wells, YPF said.

“This partnership is strategic for the company and for Argentina,” Galuccio said in the statement. “We are putting into production a resource that can change the energy future of our country.”

Chevron’s investment will help make Argentina energy independent, Ali Moshiri, Chevron’s head of Latin America, Middle East and Africa, said May 16, after touring the shale formation in southwestern Argentina.

Vaca Muerta, may hold at least 23 billion barrels of oil equivalent, according to a report by independent auditor Ryder Scott released in February 2012 by YPF. Argentina holds the world’s second-largest shale gas reserves and the fourth-largest for shale oil, according to U.S. Energy Information Administration data.

Chevron Argentina is currently producing an average of 21,000 barrels of crude and 4 million cubic feet of gas in Neuquen Basin, the San Ramon, California-based company said in a separate statement.

The shale investment “provides Chevron with a new opportunity to profitably grow production beyond our 2017 production target of 3.3 million barrels per day,” George Kirkland, vice chairman of Chevron, said in the statement.

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1 willi1 (#) Jul 17th, 2013 - 07:47 am Report abuse
what ever the conditions may be - if good or bad for arg - once a person like ck with her governmental gang will cancel it whenever they believe not to collect enough money to pay their inflationary household.
crazy chevron.
2 toxictaxitrader2 (#) Jul 17th, 2013 - 07:58 am Report abuse
Shame on Chevron! dealing with a stolen company,are there no E.U. or U.S laws against this.
3 Welsh Wizard (#) Jul 17th, 2013 - 08:30 am Report abuse
Looking at the inns and out of the deal, it is VERY favourable to Chevron. They can export up to 20% without p;aying tax and then get other rights which you really don't see int these kinds of argeements. Good on YPF though, they have managed to get someone to invest, albeit on much worse terms than Repsol. Effectively, Chevron have YPF over a barrel on this one...
4 LEPRecon (#) Jul 17th, 2013 - 09:21 am Report abuse
@3 WelshWizard

True, until of course CFK and her gang of thieves decide they've milked Chevron for enough investment money, and steal everything they can.

I assume that Chevron have invested believing that the current government will be out on their ears soon, and the next government will be more honest, and stick to the agreement.

A very foolish gamble, in my opinion, but it's their money.

I would feel better about this if I thought for one minute that the Argentine government would spend the revenue on improving Argentina's crumbling infrastructure, or helping the people of Argentina. But we all know that the vast majority of the money will disappear into various 'officials' pockets, and the rest will be used by the government to 'buy' votes.
5 willi1 (#) Jul 17th, 2013 - 09:49 am Report abuse
...and don´t forget repsol. they are still not accepting the deal as the company has been stolen by the args and they may claim against chevron.
6 yankeeboy (#) Jul 17th, 2013 - 10:37 am Report abuse
The Chevron deal was totally sketchy, first they had to promise investment to get their property released over the Ecuador suit and my guess most the the funds being used for investment are already in-country which CFK wouldn't let them xfer out anyway.
It's a PR stunt with a gun in Chevron,s back.
YPF has already filed suit against Chevron to get whatever oil comes out of VM anyway.
Chevron is just buying time until CFK is retired.
7 Welsh Wizard (#) Jul 17th, 2013 - 11:43 am Report abuse
An Argentinean poster described it pretty well on another board. Chevron gets the Vaca, YPF gets the Muerta...
8 GeoffWard2 (#) Jul 17th, 2013 - 12:58 pm Report abuse
Presumably the Chevron team have produced a cost recovery package that is very favourable, with most of the up-front and on- costs being spent in the US with 'correctly' priced money.
Only when their ongoing cost-base is satisfied will they look at nett profit. 50% of an unknown proportion, and then 20% of the total nett profit being exported tax-free seems a good deal to me.

God help them though if they contaminate any land - especially if there is the one indiginant still living there. Ecuador can be put centre stage at any time; and Brasil. Everybody has seen how BP is being milked by the millions of claims; some which, I understand, stand up in court.
9 Simon68 (#) Jul 17th, 2013 - 01:27 pm Report abuse
Chevron have contracted to invest U$S 1.24 billion in exchange for having U$S 19 billion released from embargo!!!!!!! That alone seems a pretty good deal, BUT on top of that they will be able to export 20% of oil and gas produced TAX FREE!!!!!

CFK is totally desperate!!!!!!

And Chevron probably is selling off as much of its Argentine assets as it can and taking advantage of being able “legally” to repatriate U$S!!!!!!!
10 yankeeboy (#) Jul 17th, 2013 - 04:21 pm Report abuse
9. Tax free for how long?
My guess CFK will nullify that deal as soon as the oil starts pumping
11 Mastershake (#) Jul 17th, 2013 - 04:26 pm Report abuse
I agree with Yankeeboy, I think Chevron was kind of pushed into this...but I think they also want to get their foot in the door on these massive reserves. And like Yankeeboy, I think they'll hold off any REAL investment until CFK's gone. Shale reserves like this take a long time to develop, so by the time Chevron ramps up to full speed and is seeing real return on its investment, CFK will be long gone, fled to her Paris home
12 Mick23 (#) Jul 17th, 2013 - 04:39 pm Report abuse
Most probably obliged due to the Argentine court siding with them on the Ecuador lawsuit. Chevron walked into that one after they bought into that property around aguas negras... Contaminated by the Ecuadorians themselves through rampant corruption at Petro Ecuador way back in the 80's.
I would say they are walking into another one here, but if you think about the financials they might actually save some money on the deal.
Timerman is un gran idiota de primerorden.
13 Think (#) Jul 17th, 2013 - 06:36 pm Report abuse
(3) & (7) Welsh Wizard

You say….:
”Looking at the inns and outs of the deal, it is VERY favourable to Chevron.”
”Effectively, Chevron have YPF over a barrel on this one.”
”Chevron gets the Vaca, YPF gets the Muerta.”

I say….:
You make it almost sound as if Chevron got a killer deal here with us, ”poor desperate” Argies giving the ”Family Silver” away to the Yanks for meager 1,500 million U$S…......................

May I ask….?
Q…: Do you know how big the ”Vaca Muerta” formation is?
A…: ~30,000 km2

Q...: Do you know what YPF’s share in ”Vaca Muerta” is after this deal?
A…: 12,000 km2 (40%)

Q...: Do you know what Chevron’s share in ”Vaca Muerta” is after this deal?
A…: 395 km2 (1,3%)

I ”Think” those ”Conditions” are not so bad, considering that YPF (Yacimientos Petroliferos Fiscales) was re-nationalized just over one year ago…..

I reckon it took PEMEX (Petroleos Mexicanos) nearly thirty years to attract some foreign investors back after their Oil Nationalization……
14 pgerman (#) Jul 17th, 2013 - 08:03 pm Report abuse
There are some details that are not mentioned in this article about Vaca Muerta and the agreement between YPF and Chevron.

Vaca Muerta is located in the Province of Neuquen. It's paret of the Argentine territory thank's to the “genocide” action of President J. A. Roca.

Chevron will contribute with 1.24 billion dollars for an initial operating 4942 acres, 740 of which will be spent on the acquisition of assets and 240 to compensate YPF for work performed in the area. So genuine investment will be only U$S 500 million

YPF will transferr assets from Chevron to Repsol which the Govenrment (Nation) has appropriated without paying a coin to Repsol.

Some details of the agreement still remain in the shadows, but it is known to be held under U.S. jurisdiction. This means that any dispute will be discussed in the courts of New York State.

Any compensation from Chevron that Repsol can get in the justice will be borne by YPF. That is, the Argentine Nation.

Some clauses would also release Chevron from the dollar clamp, so they would collect their income in dollars.

A previous legal regime expect oil free availability of 70% of foreign exchange earnings and deductions provided. The government promises Vhevron a bit more flexible access the dollar and moderate retentions for five years.

Up to now, not any discussion was held in the any of both Chambers. This agreement with Chevron seems to be so uncomfortable for the Peronist Party that forced the precipitate issuing Decree 929 yesterday. The Government attempts to universalize the benefits granted to Chevron, so it does not become so outrageous.
15 Pugol-H (#) Jul 18th, 2013 - 01:19 am Report abuse
1.24 Bn USD is actually peanuts, in terms of what is required here.

However there is a chance they could get their money back, and much more importantly, it has released 20 Bn USD in Chevron assets previously frozen in Argentina at the behest of the Ecuadorians.

Cheap at twice the price.

Wonder how the Ecuadorians feel about this.

Solidarity, no doubt.
16 Welsh Wizard (#) Jul 18th, 2013 - 08:46 am Report abuse

Don't worry Think. I know quite a bit about Vaca Muerta and Neuquen, I'm also pretty certian that I've been there more times than you and know more people in the oil industry there. Re your questions:

Q...: Do you know what YPF’s share in ”Vaca Muerta” is after this deal?
A…: 12,000 km2 (40%)

Q...: Do you know what Chevron’s share in ”Vaca Muerta” is after this deal?
A…: 395 km2 (1,3%)

A 40% share of an area where no exploration is going isn't very helpful at all. My point was that Chevron has the rights over the area it is exploring and have managed to get a very good deal for this area. They will take the majority of the benefit for this, not YPF. Again, you aren't looking at the finer points. For example, the UK sits on one of the largest shale deposits in the world but it is mostly underwater. We have ownership of 100% of that...but it is pretty bloody useless having ownership if you aren't able to expliot it.
17 Captain Poppy (#) Jul 18th, 2013 - 04:15 pm Report abuse
#15 Those unfroznd assets is what made this deal happen. I can see down the road that when Chevron hits pay dirt, Argentina will claim they violeted terms with envirmental pollution and take over from there. Thats when Ecuador will have forced Argentina to enforce freezing assets.....something along those lines. Unless there is a escrow, I think Chevron is going to get screwed.....unless of course nothing is found. investing 1.5 billion to get back 20 billion is worth it.
18 Think (#) Jul 18th, 2013 - 06:30 pm Report abuse
(16) Welsh Wizard

”Again, you aren't looking at the finer points….” you say….:

Let’s look at the “Finer points” then, shall we?
1) You certainly know more people than I in Neuquen's oil industry……, I don’t recall knowing any…..
2) I’m pretty certain that you have NOT been in Neuquen more times than me….... I can’t even begin to count how many times I’ve crossed the Nahuel Huapi and the Limay into Neuquen’s territory during my childhood…… And that was a looooong time ago….
3) Chevron has struck a good deal, indeed…….. But so has YPF…. Especially under the present circumstances….
19 Welsh Wizard (#) Jul 19th, 2013 - 08:35 am Report abuse
1) true
2) amend that to recently
3) Chevron - Yes. YPF - not really. It is not a deal like other public private ventures. Chevron get to exploit a certian area and then they get massive tax breaks and the consession over that area allows for mas exportation. YPF don't actually get that much apart from saying that they have managed to find someone on the globe who is willing to invest a tiny amount (lets not forget that fact that Chevron could well be using this as a make-weight to get their $19bn out of the country)
20 Pugol-H (#) Jul 19th, 2013 - 12:28 pm Report abuse
3) Almost any deal is a good deal for YPF under the present circumstances, as its all that’s on offer.
21 Captain Poppy (#) Jul 19th, 2013 - 12:36 pm Report abuse
What ever did become of their autarkical model? Seems members of her party is not happy, opposition is not happy, Mapuche people are not happy. But who cares.....this will be money for kirchner to steal and the Mapuche are indigenous, it's not like kirchner cares about anyone but herself let along indigenous people.

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