Chevron Steps Into Argentina
BMI View: Chevron 's recent agreement with YPF for a pilot development project in the Vaca Muerta is a critical breakthrough for YPF , which is in desperate need of foreign financing and assistance to develop its shale reserves. If successful, the move could de-risk Argentine for others and pave the way for additional investment. For YPF's part, it is betting on this reversal of Argentine fortunes to stave off a forecasted production decline over the next decade.
Argentina ' s recently-nationalized YPF and Chevron have signed an agreement for a pilot project to develop the country ' s vast shale reserves in the Vaca Muerta formation. The plan will involve the drilling of 100 wells in 2013 at a shared cost of US$1bn. The deal signing represents the first agreement signed between YPF and an international oil company (IOC) since the Argentine government expropriated YPF from the Spanish company Repsol in early 2012.
We have long been highlighting the risks posed to IOCs interested in working Argentina. These risks stem from both a challenging and rapidly deteriorating business environment for companies in strategic sectors in Argentina, especially after YPF ' s nationalisation. Indeed, the primary challenges include oil and gas prices (now to be managed by the recently established national hydrocarbon planning commission), currency controls and import restrictions ( see our online service, September 3 2012, 'YPF's Investment Plan Depends On Risk-Tolerant Foreign Investors' ). Chevron also faces specific legal challenges pertaining to its entrance into Argentina, as Repsol has already filed lawsuits in Spanish and American courts against the supermajor for " disloyal competition " ( see our online service, November 21 2012, ' Repsol Lawsuit Another Blow To Chevron ' s Argentine Shale Dreams ' ).
|Betting on Vaca Muerta|
|Argentine Proven Oil Reserves and Production|