Argentina nationalized YPF in May, alleging its principal shareholder Repsol of Spain wasn't reinvesting enough earnings in the company, affecting its performance and output. The state takeover has created tensions in Argentina's ties with the European Union, which has warned Buenos Aires faces wide-ranging punitive action, include trade curbs.
U.S. officials said the seizure of Repsol's assets compounded Argentina's problems, including its attempts at finance rehabilitation since its 2002 sovereign default.
Argentina approached Russia with partnership proposals after failing to win investor interest in other countries that don't want to offend Spain or Repsol S.A., one of the largest energy companies.
Argentine President Cristina Fernandez de Kirchner and Russian President Vladimir Putin met at the Group of 20 summit in Mexico in June.
Other than Russia, Argentina has had enthusiastic offers of partnership from Venezuela's state company PDVSA. YPF is also pursuing talks with China on potential collaboration.
Russia is keen to enter Argentina's energy market after successful forays into Venezuela. Gazprom is exploring for natural gas in that country as part of a Russian consortium.
Gazprom's interest in Argentina as a potential market for its liquefied natural gas has grown as the market for its LNG in Europe has shrunk.
The biggest blow to LNG demand worldwide has been the rise of shale oil and gas as an alternative. Increasing shale gas production has dampened demand for LNG. Recent innovations in shale gas extraction, including non-hydraulic methods that reduce risks to underground water resources, have helped shale energy's recent ascendancy and lessened interest in LNG.
Gazprom is keen to exploit its installed LNG capacity and secure Argentina as a market. YPF is under increasing pressure from Fernandez to perform better than under Repsol management and to increase domestic energy output, including vast untapped shale resources.
Argentine LNG imports have risen while output of its own natural gas has fallen 15 percent over the past decade.
A key to current Argentine-Russian talks is the future of the Vaca Muerta shale site in Argentina's Neuquen province, which Buenos Aires wants developed with investor cash. About $25 billion will be required to develop the shale oil and gas resource to a commercially viable level.
Argentine officials say sufficient investment in Vaca Muerta would enable the country to double oil and gas production and cut dependence on imports within a decade.
Investors have been promised incentives for participation in the plan but some have balked and walked away, citing Argentina's takeover of YPF and linger effects of its sovereign default.
Canadian energy firm Americas Petrogas Inc. announced this week it completed a multistage fracturing of a shale formation under its license. The company plans to test the well, LTE.x-1 on the Los Toldos II block, which it operates and shares with ExxonMobil at 45 percent and Gas y Petroleo del Neuquen at 10 percent.
The Vaca Muerta site produces about 5,000 barrels per day of oil but is estimated to contain about 927 million barrels of oil equivalent.
Argentina country still cannot borrow freely in international capital markets because of continued concerns over its credit worthiness. Argentina's 2002 sovereign default reverberates through markets and the country is being pursued by past creditors.
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