Chevron and Argentina Back on for Exploration of Vaca Muerta Shale

Michael Teague |

ChevronOn Wednesday, the Argentine Supreme Court reversed a November 2012 decision to freeze 40 percent of Chevron’s (CVX) bank accounts, clearing the way for a $1.5 billion venture between the company and Argentina’s largest energy company YPF S.A. (YPF) to explore what is thought by what could be one of the world’s biggest shale reserves.

The Vaca Muerta shale is located in central-western Argentina on the border with Chile, and according to Chevron could be the world’s second-largest reservoir of shale oil. The embargo on Chevron’s assets was the result of a complaint brought by the Ecuadorian government over environmental damages allegedly caused to that country’s Amazon forest by the Chevron-bought Texaco Inc. back in 1993.

The legal basis for the move originates in a treaty between Colombia, Argentina, and Ecuador, by which the latter is seeking to recuperate $19 billion in damages from the oil giant. The move found its way into Argentina’s legal system because Chevron has no assets in Ecuador.

Since being nationalized last year by Argentine president Cristina Fernandez de Kirchner, YPF has spent the past months in negotiations with the U.S.’s second largest oil company. The partnership could expand to $15 billion in investments, and comes at a time when the Argentine firm has had seen a drop in output, and has had considerable difficulty reaching unconventional oil and gas deposit throughout the South American country.

YPF has also signed deals with its domestic colleague Bridas, as well as China’s CNOOC, while Brazilian oil giant subsidiary Petrobras (PZE) is in the country, and Apache (APA) and Exxon Mobil (XOM) are already working in the Vaca Muerta. The formation is estimated to contain some 22.8 billion barrels of oil and gas to which Argentina’s beleaguered and inflation-ridden economy desperately needs access.

Towards the end of trading on Wednesday, shares for YPF had bumped up 1.8 percent to $14.65, while Chevron’s had slipped some 0.9 percent to $121.87.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
APA Apache Corporation 63.87 0.13 0.20 5,292,485
BH Biglari Holdings Inc. 436.02 12.59 2.97 3,826
CVX Chevron Corporation 102.92 1.65 1.63 9,431,524
PZE Petrobras Argentina S.A. ADS 6.58 0.06 0.92 151,637
YPF YPF Sociedad Anonima 18.22 0.31 1.73 456,808

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