Argentine court orders probe into YPF-Chevron shale deal
15 May 2014
On May 13, an Argentine federal court ordered an investigation of President Cristina Fernandez for alleged abuse of authority in connection with state-owned oil company YPF's deal with Chevron to develop the massive Vaca Muerta shale formation in Neuquen province in western Patagonia.
Buenos Aires parliamentarians had sought the probe for alleged "abuse of power, dereliction of duty and attempted environmental damage."
The complaint referred to the agreement between the two parties signed on July 16, 2013, one day after Fernandez issued a decree to allow energy companies that invest at least $1 billion in Argentina over five years to avoid export taxes on up to 20% of their oil and gas output.
The YPF-Chevron deal involves a pilot program in the Loma Campana section of Vaca Muerta involving an investment of $1.24 billion to drill 161 wells and develop a 20-sq. kilometre area.
The $1.6 billion second phase of the Vaca Muerta project, signed in May, will involve drilling some 1,500 wells to develop a 395-sq.-kilometre area.
According to the EFE news agency, when the second phase is operational, the companies expect to achieve daily production of 50,000 barrels of oil and 3 million cubic meters of associated natural gas.
Current production at Loma Campana stands at 20,000 barrels of oil equivalent per day.
Vaca Muerta is a huge deposit that ranks Argentina second in the world for shale gas reserves and fourth for potential shale oil reserves. It was first discovered in 2010 by YPF when it was owned by Spanish energy group Repsol, whose 51% stake was nationalised by the Argentine government in 2012.
Following the nationalisation, YPF’s oil production dropped significantly, according to data from Argentina’s Department of Energy, and President Kirchner encouraged the link up with Chevron to boost the country’s oil and gas output at a time when massive energy imports were strangling the economy. The country's energy import costs hit $9 billion in 2013 alone.
With encouragement from Chevron, the Argentine government signed an agreement with Repsol to indemnify it for the nationalisation of YPF in February, potentially avoiding a long drawn out international legal battle. But the May 13 filing means there are further hurdles to overcome before the legal shadow can be lifted from Vaca Muerta.
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