YPF talks to Statoil on shale partnership

YPF is said to be in talks with Norway’s Statoil about a possible partnership as part of its US$37 billion drive to develop Argentina’s energy reserves. It is close to signing deals with US oil giant Chevron as well as Bridas Corp, the Chinese-Argentine joint venture, the Financial Times reported yesterday.

Following May‘s expropriation of the oil giant from Spanish oil major Repsol, any kind of deal would spell good news for President Cristina Fernández de Kirchner‘s government as it seeks out new partners and investment.

YPF says it needs to invest over US$30 billion in the next five years, US$4.5 billion of which is to come from strategic partners, to help pay to develop Argentina’s huge shale oil and gas resources.

Argentina’s shale gas reserves are the third-largest in the world after the US and China, but requires foreign capital and technology in order to facilitate production and decrease its energy import bill. But Argentina is locked out of global credit markets, is considered a pariah by many investors, and faces lawsuits due to the Repsol nationalization.

“I’m not just talking to Statoil about the Norwegian company’s admirable ownership and governance model,” Miguel Galuccio, YPF’s chairman and chief executive, told the Financial Times after a London investor conference.

Talking to foreign media for the first time, Galuccio said he would travel to Oslo today to meet with Statoil. He added that he was “confident” about completing deals with Chevron and Bridas by yearend.

Bridas is owned by billionaire Carlos Bulgheroni. The YPF investment would be made through its British Virgin Islands’ registered subsidiary, Bridas Corp, which is half-owned by the China National Offshore Oil Corp (CNOOC).

Galuccio said Chevron and Bridas would develop two separate pilot fields, and each would require an initial investment of up to US$2 billion. These upfront investments would be used “to carry” YPF through until the fields produced sufficient gas whereupon YPF could market the gas to fund its share. Full development of each field would cost around US$10 billion, he said.

“I am very confident about Bridas, and I am confident too about Chevron. But Chevron is a corporation, so the proposal has to go to the board first,” the chairman said.

He did not make any further comments about Statoil’s possible role. The Norwegian state-controlled company has a lot of offshore oil expertise in the North Sea as well as shale interests in the US and Australia.

Argentina’s shale reserves comprise 774 trillion cubic feet of gas, according to the US Energy Information Administration, and are concentrated in the Vaca Muerta rock formation. Vaca Muerta holds 23 billion barrels of oil equivalent and is considered to be as exciting as Eagle Ford, Haynesville and Marcellus in the US, and more advanced than China’s vast prospects.

However, lawsuits and Argentina’s difficult relations with international investors have made raising money an uphill climb for the government.

BOND

YPF will launch a bond for small investors who will be able to subscribe via a dozen local banks.

The securities offered by the company will be available until December 14 inclusive and the bond‘s total is worth 50 million pesos.

“This is a singular investment that has been designed for small invsetors who are looking for a profitable and attractive way of making their money work for them,” the company said in a press release.

Minimun investment is 1,000 pesos ,and it has a fixed termof 365 días, with a 19 percent interest rate.

Herald with Financial Times, Reuters