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Miguel Galuccio, the president of YPF, and Ali Moshiri, Chevron’s Latin America and Africa chief have just signed a letter of intent to begin work on the development of a huge shale project in the Vaca Muerta area of Argentine Patagonia.
The Vaca Muerta shale formation is believed to hold the third largest shale resources in the world.
The deal will begin with more than 100 wells being drilled in the first year, an effort that YPF hopes will massively boost production in order to meet Argentina’s growing energy demands in the future.
The initial cost of the project will be around $1 billion, but it has been estimated that $15 billion may be needed to develop the entire Vaca Muerta formation.
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Argentina has always known that it requires huge amounts of foreign investment in order to develop the play, but until now major oil companies have avoided the country. Mainly due to the government’s clumsy dealings in the market, such as the seizure of YPF from the Spanish company Repsol, and also partly due to the fact that Repsol promised to sue any company that partnered up with YPF.
Repsol has stuck to its guns and filed a case against Chevron earlier this month in New York to try and prevent it from developing Argentine assets with YPF.
It has been stated that the deal between Chevron and YPF will not be affected by the embargo that an Argentine judge placed on all Chevron’s assets as part of the Ecuadorean court case.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com