Argentina Could Become Gas Exporter

Argentina could become a major producer, and eventually a major exporter, of shale oil and gas.

The South American nation once was a major gas exporter, but not all that long ago its reserves began dwindling, and the government halted exports to instead focus on its blossoming economy.

Now, however, Argentina has discovered its shale reserves. The U.S. Energy Information Administration estimated the nation has roughly 774 trillion cubic feet of potentially recoverable shale gas reserves, putting it at number three in the world, and it also has an abundance of shale oil.

The reserves were discovered by YPF SA (NYSE: YPF), initially a subsidiary of Spanish company Repsol (MCE: REP). This year, however, the Argentinian government under President Cristina Fernandez seized 51% of the subsidiary after accusing Repsol of failing to sufficiently invest.

Now, state-owned YPF plans to begin exploration of the vast resources. The company has revealed plans to put $1.36 billion into testing extraction techniques.

If this is successful, officials have said, the company will put $12 billion into recovering the resources.

But Friday, it announced it likely won’t be doing this alone. U.S. oil giant Chevron Corp. (NYSE: CVX) plans to partner with the state-owned company to aid in the resource extraction.

From MarketWatch:

“We had concrete dialogue about different alternatives of cooperation,” [YPF CEO] Mr. {Miguel] Galuccio said. “Chevron is very interested in developing projects together [with YPF], and we want a partner with the weight and experience of this world-class company.”

YPF plans to invest a total of $35 billion in the project between 2013 and 2017. By 2016, Galuccio has said, they will have drilled 250 exploratory wells.

And Chevron wants to help the company keep up. In addition to those 250 wells, Chevron will be drilling 120 of its own wells in the next three years.

Chevron’s president of Latin America and Africa, Ali Moshiri, said in a conference:

“We believe there are enough resources in Argentina. We believe there is the right environment to work.”

Next Thursday, YPF’s Galuccio will be presenting a five-year plan for the company. Though all that was revealed from Friday’s talks between Chevron and YPF were the desires for a partnership and a basic outline of plans, it is possible that something more concrete will be revealed at that later date.

Both Chevron and YPF have expressed sentiments that these unconventional resources are key to energy development. Moshiri said of his company:

“Last year, we spent almost 20% of our exploration money, about $2.5 billion, exploring for unconventional. Ten years ago I would never had thought of that.”

But now that the resources have become available, it is a reality.

Chevron is heavily involved in the U.S. shale boom, with operations at the Marcellus shale and Haynesville shale deposits. The company would bring prior experience and knowledge of unconventional development to the partnership.

YPF was up 3.19% on Friday to $12.30. Chevron rose 0.52% to $111.87.

That’s all for now,

Brianna Panzica

@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.