Chevron Corp. (CVX:US), the world’s third-largest oil company, signed an accord with Argentina’s YPF SA to invest $1.6 billion this year in shale development and become the country’s largest foreign producer of shale oil and natural gas.
Chevron and state-run YPF plan to drill 170 wells in a 96,000-acre area this year in Argentina’s Vaca Muerta formation, the world’s second-largest shale gas deposit and fourth-largest shale oil reservoir, both companies said today in separate statements.
Argentine President Cristina Fernandez de Kirchner’s government expropriated a 51 percent stake in YPF from Spain’s Repsol SA (REP) in April 2012 after saying the Spanish oil company hadn’t invested enough in exploration. Repsol’s board agreed in February to accept $5 billion in compensation for Argentina’s expropriation of the unit. Ending the two-year international dispute may help attract investors to the country.
“This is a significant step in our subsidiaries’ joint efforts with YPF to develop one of the most exciting shale plays in the world today,” Chevron Vice Chairman George Kirkland said in the company’s statement. “Vaca Muerta could become an important contributor to Chevron’s long-term production growth.”
The latest investment follows an initial $1.24 billion pilot investment financed by Chevron and paves the way for a total plan of $15 billion. The joint venture partners are targeting daily output of 50,000 barrels of shale oil and 3 million cubic meters of shale gas by drilling 1,500 wells.
Vaca Muerta, Spanish for dead cow, may hold 23 billion barrels of oil equivalent, according to a report by independent auditor Ryder Scott released in February 2012 by YPF.
YPF’s American depositary receipts were little changed at $30.65 at 11:52 a.m. in New York Chevron fell 1.2 percent to $117.64.
Chevron late yesterday said it is on track to post its lowest first quarter production in eight years after bad weather disrupted operations in Central Asia and North America.
Chevron is the third most valuable oil producer after Exxon Mobil Corp., and Royal Dutch Shell Plc.
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