BUENOS AIRES Spanish energy company Repsol (REP.MC) said on Thursday it found Argentina's first shale oil resource outside the giant Vaca Muerta field shortly before the government seized control of its YPF unit in April.
The discovery, in the San Jorge Gulf basin in Santa Cruz province, where the majority of Argentina's crude is produced, is further evidence the country may have some of the world's biggest unconventional energy reserves.
Under Repsol's watch, YPF (YPFD.BA)(YPF.N) discovered the shale oil in two exploratory wells on the Canadon Yatel and Los Perales blocks. Additional studies determined that the deposit to be prospected totaled some 10,800 square kilometers (4,200 square miles) - with YPF holding concessions in roughly half that area.
A spokesman at Repsol in Madrid said YPF was going to make the discovery public in April but those plans were scrapped when the government appointed state administrators at the firm and then nationalized it with congressional backing.
"The findings are the result of Repsol YPF's administration and investments in recent years," the Repsol spokesman said.
A spokesman at state-controlled YPF said the company would not comment on the information.
Argentina's Congress nationalized YPF on the grounds that Repsol did not invest enough to sustain oil and natural gas production amid burgeoning demand, forcing the government to spend more on fuel imports.
Fuel purchases last year ate into Argentina's trade surplus, which is a key source of foreign currency in a country that has been virtually shut out of global credit markets since defaulting in 2002 on a massive amount of debt.
Repsol denies the government's accusations and says its investments in exploration helped uncover shale oil and gas resources at a time when conventional fields were losing steam.
The Spanish company has vowed to fight to be compensated for the state takeover. An Argentine panel will determine how much to pay Repsol for its controlling stake in YPF, but government officials have already said the amount will be well below the $9 billion to $10 billion Repsol is seeking.
Although the discovery in Santa Cruz may cover only about one-third the size of the massive Vaca Muerta field, it is still a potentially important find.
"If it's really 10,800 square kilometers, that's a very, very big resource," an oil sector analyst in Buenos Aires said on condition of anonymity, since he did not know firsthand the details of the discovery.
Next year, YPF plans to drill 132 crude and 14 natural gas wells at Vaca Muerta, which largely lies in Argentina's southern province of Neuquen. The company has not said how it plans to finance this $1.36 billion operation.
In early June, YPF said it needed to invest $7 billion a year to increase production 26 percent by 2017.
Energy analysts say Argentina's development of shale resources, which costs more than traditional production, will likely be hindered by limited access to capital markets and price controls that damp incentives to invest.
YPF belatedly published its first-quarter results on Thursday, reporting a 27 percent fall in net profit to 1.29 billion pesos ($295 million) in the first three months of the year.
The company, which is expected to report second-quarter earnings next week, also named Daniel Gonzalez -- a former executive with Bank of America Merrill Lynch -- as chief financial officer.
($1 = 4.38 Argentine pesos as of March 31)