December 9, 2012 7:06 pm

YPF in shale partnership talks with Statoil

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Repsol-YPF gas plant in Loma de la Lata, Neuquen province, Patagonia Argentina©Bloomberg

YPF, the Argentine state-controlled energy company, is in talks with Norway’s Statoil about a potential partnership as part of its $37bn push to develop the Latin American country’s massive energy reserves. It is already close to signing deals with Chevron, the US oil major, and Bridas Corp, the Sino-Argentine joint venture.

Any deal with such deep-pocketed partners would mark a breakthrough for Argentina’s government in its search for fresh partners and investment after it enraged European Union policy makers by nationalising a majority stake in YPF from Spanish oil major Repsol in May.

Argentina has the world’s third-largest shale gas reserves after the US and China, and requires large amounts of foreign capital and technology to bring them into production and so close its gaping energy import bill. But the country is virtually locked out of global credit markets, is considered a pariah by many investors, and faces lawsuits from the Repsol nationalisation.

“I’m not just talking to Statoil about the Norwegian company’s admirable ownership and governance model,” Miguel Galuccio, YPF’s chairman and chief executive, told the Financial Times after a London investor conference.

In his first interview with foreign media, Mr Galuccio said he was travelling to Oslo on Monday for talks with Statoil, and that he was “confident” about finalising the deals with Chevron and Bridas this year.

Bridas is owned by an Argentine billionaire, Carlos Bulgheroni. The YPF investment would be made through its British Virgin Islands’ registered subsidiary, Bridas Corp, which is half-owned by the China National Offshore Oil Corp.

Mr Galuccio, 44, said Chevron and Bridas would develop two separate pilot fields, each requiring an initial investment of up to $2bn. These upfront investments would be used “to carry” YPF through until the fields produced sufficient gas whereupon YPF could market the gas to fund its share. Full development of each field would cost around $10bn, he said.

“I am very confident about Bridas, and I am confident too about Chevron. But Chevron is a corporation, so the proposal has to go to the board first,” Mr Galuccio said.

He declined further comment about Statoil’s possible role. The Norwegian state controlled company is best known for its offshore oil expertise in the North Sea, but also has shale interests in the US and Australia. Statoil did not comment.

Argentina’s shale reserves contain some 774tr cubic feet of gas, according to the US Energy Information Administration, and are concentrated in the Vaca Muerta rock formation, which has 23bn barrels of oil equivalent and is considered as exciting as Eagle Ford, Haynesville and Marcellus in the US, and more advanced than China’s vast prospects.

However, lawsuits and Argentina’s difficult relations with international investors have made raising money an uphill climb.

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