YPF, the energy company in which Argentina holds a majority stake said its next shale oil and gas partnership will be with a group including China’s Cnooc. A deal is expected to be signed sometime next month.
China’s biggest offshore energy explorer “probably will sign next month a definitive deal to explore and develop deposits in the Vaca Muerta formation, either as part of its Bridas Corp. joint venture with the billionaire Bulgheroni brothers or with the Bridas-run Pan American Energy LLC”, YPF board member Hector Valle said in an interview.
An agreement with Cnooc and Bridas would be YPF second binding shale partnership in the 16 months since President Cristina Fernandez seized a majority control of the company from Spain’s Repsol.
Argentina is counting on companies including Chevron, which signed the first YPF shale deal last month, to help develop Vaca Muerta and boost gas reserves that now stand at just six years of consumption, Valle said.
“We have gas for six years, when the ideal is reserves for 10” Valle pointed out, but “to develop the shale projects will require at least four or five years to start adding reserves, so the clock is ticking.”
“As soon as Chevron is fully approved by Neuquen province, the door will be open to immediately seal new partnerships” said Valle adding that “after the Americans, it will be the turn of China, either with the Bulgheronis directly or via Pan American. That’s been discussed.”
Once a definitive arrangement with Cnooc and Bridas is in place, YPF will work on Vaca Muerta partnerships with US Dow Chemical and Argentine billionaire Eduardo Eurnekian’s Corporacion America, with which the state company has signed preliminary accords, Valle said.
Bridas, which owns a 40% stake in Delaware-based Pan American Energy and manages the company, reached a preliminary agreement with YPF in December to develop Vaca Muerta, home to the world’s second-largest deposits of recoverable shale gas. BP holds the other 60%.
President Cristina Fernandez, who last month offered oil and gas companies incentives if they invest at least one billion dollars over five years, is seeking to stem fuel imports that doubled to 9.4bn in 2011 and are forecast by former Economy Minister Roberto Lavagna to rise to as much as 15bn this year.
Chevron will invest an initial 1.24 billion as it partners with YPF in Vaca Muerta, which may hold at least 23 billion barrels of oil equivalent, a report by independent auditor Ryder Scott released in February 2012 by YPF showed.
Signing up partners to share the financial burden of developing the formation is essential given Argentina, and YPF, have been shut out of international capital markets because of double-digit borrowing costs for Argentine issuers, Valle .