Argentina's YPF, Russia's Gazprom Move Toward Joint Venture
September 04 2015 - 07:10AM
Dow Jones News
BUENOS AIRES—Argentina's YPF SA and Russia's OAO Gazprom signed
an agreement on Friday that could lead them to jointly develop
unconventional gas projects in the South American country.
YPF confirmed that Miguel Galuccio, the company's chief
executive, signed the so-called framework agreement with Gazprom
Chief Executive Alexei Miller in the southeastern Russian city of
Vladivostok.
The deal comes as YPF energetically courts foreign investment in
Argentina's energy sector, which is home to the biggest
unconventional oil and gas development outside North America. It
also comes as Gazprom, already the world's leading player in
conventional gas, is looking to expand oil and gas projects around
the world.
YPF has already attracted major partners to invest in
unconventional shale oil and gas, signing multibillion-dollar deals
with Chevron Corp. and Malaysia's Petroliam Nasional Bhd, or
Petronas.
Argentina's Vaca Muerta—or "dead cow"—shale formation, located
in the Patagonian Province of Neuqué n, is one of the world's
most-promising shale oil and gas resources. In 2013, a U.S. Energy
Information Administration report ranked Argentina second in the
world, behind China, in potentially recoverable shale-gas
resources, with 802 trillion cubic feet. Argentina ranked fourth
world-wide in shale-oil resources, with an estimated 27 billion
barrels.
Yet unlike unconventional oil and gas fields in North America,
Vaca Muerta remains largely untapped. Analysts say it could require
up to $200 billion to fully exploit, but that Vaca Muerta could in
theory do for Argentina what fracking did for U.S. oil and gas
production.
After a decade of declining oil and gas production at home,
Argentina's government expropriated YPF in 2012 and named Mr.
Galuccio CEO. Since then, Mr. Galuccio, who was previously a
seasoned international oil executive with a vast network of global
contacts, has moved to reverse production trends in Argentina.
"Today's signing is a milestone for YPF on its path to making
our resources valuable to world class partners," Mr. Galuccio said
in an email from Russia. "Gazprom can bring to YPF its know-how and
its financial strength as the biggest player in gas on the
planet."
While YPF has already gained key experience operating
unconventional fields by using hydraulic fracturing, or fracking,
Gazprom would bring unique experience in pipeline logistics and
other production technologies.
Though the companies didn't discuss numbers, YPF is hopeful that
a deal with Gazprom could eventually become similar in scale to
joint ventures already in place with Chevron and Petronas.
Together, YPF and Chevron have invested more than $3 billion, and
total investment by the companies could reach $16 billion over the
next 15 years. YPF's deal with Petronas could lead to up to $9
billion in investment over the next decade.
A deal with Gazprom could potentially be even more ambitious in
terms of its operational scope, with the Argentine and Russian
companies developing multiple fields at the same time. The
agreement signed on Friday calls for the companies to work out the
details of at least one joint project by March 1, 2016.
Write to Taos Turner at taos.turner@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 04, 2015 07:55 ET (11:55 GMT)
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