BUENOS AIRES, May 17 (UPI) -- U.S. oil and gas major Chevron will invest $1.5 billion in Argentina's ambitious shale development project in Patagonia despite energy industry skepticism over Argentine President Cristina Fernandez keeping promises made during negotiations.
Chevron agreed to pour the money into a project made more controversial by its stewardship. YPF, the energy company seized from Spanish oil major Repsol last year, is running the program to exploit Patagonia's vast Vaca Muerta shale formations in the south.
Argentina has ignored Repsol litigation warnings and ignored demands for more than $10 billion in compensation. Instead Buenos Aires has gone on a global hunt for partners in the confiscated company and found several despite Repsol warnings it will sue any company that works with YPF.
Before Chevron agreed to invest in the shale project, Argentina secured investment pledges from Bridas, an oil company owned by Argentine billionaires Carlos and Alejandro Bulgheroni and China's state-run CNOOC.
Repsol, too, retains a minority share in YPF and Exxon Mobil and Apache are also active in shale development, an indication of the cut-throat competition in the global energy market.
Fernandez wants to raise $15 billion for Vaca Muerta, which means Buenos Aires may seek more international partners. The government is struggling to beat down inflation and running an international incentives campaign for Argentines holding funds abroad or in U.S. dollar cash within the country.
Fernandez hopes improving the country's dollar reserves through a dollar amnesty and YPF investment program will help her fight inflation and keep the economy ticking over.
Chevron's agreement to invest in YPF is subject to further agreements on terms and conditions of the deal but both sides say Chevron's involvement is part of a pilot project in a long-term strategic development.
More than 100 exploratory wells in Vaca Muerta will seek to establish the area's potential.
YPF data indicate Vaca Muerta may hold 22.8 billion barrels of oil and gas equivalent.
Estimates by the U.S. Energy Information Administration suggest Argentina may have more than 770 trillion cubic feet of recoverable shale gas. That will make Argentina's shale reserves the third largest in the world after China and the United States.
Forbes termed Chevron's deal with Argentina a "pact with the devil," arguing the biggest threat to the oil major could be the Fernandez administration itself. Argentina and Spain are deadlocked over Repsol compensation claims since the government's seizure of Repsol's majority stake in YPF.
YPF Chief Executive Officer Miguel Galuccio has already escorted Chevron's Latin America head Ali Moshiri to Patagonia's shale formation. Moshiri praised YPF's exploration work in the area, a YPF statement said.
Argentina says it wants to develop shale as a matter of urgency. It has struggled to meet domestic energy requirements after a fire at YPF's La Plata refinery about 40 miles south of Buenos Aires.