UPDATE 1-YPF sees deals with Bridas, Chevron before year-end

Fri Dec 7, 2012 11:24am EST

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By Sarah Young

LONDON, Dec 7 (Reuters) - Argentine energy firm YPF is close to inking two partnership deals, putting it on the right t r ack to meet its investment goals and bring huge shale gas resources onstream months after it was nationalised.

YPF chief executive Miguel Galuccio said on Friday he expected the company to finalise a deal with U.S. oil major Chevron and one with Argentine company Bridas Holding before the end of the year.

"We are progressing with two companies. One is Chevron and the other is Bridas. We are now in the final stages of the commercial discussions," Galuccio told an investment seminar in London.

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

Finalising one of the deals would be the first major investment in YPF since Argentina's left-leaning government seized a majority stake in the company from Spanish oil firm Repsol.

Signing of commercial terms between YPF and Chevron, which Galuccio said would be agreed before the end of the year, would build on an accord the two signed in September and against which Repsol has filed a U.S. lawsuit.

Galuccio said he was "very confident" that the legal threats to YPF's deal with Chevron would not impact it, adding that it was not something he was concerned about.

"The issue between Repsol and the Argentinean national government has nothing to do with YPF," he said.

"There's no claim that Repsol can do to freeze or stop the development of the company."

LURE OF SHALE GAS

The partnership deals with both Bridas and Chevron will focus on YPF's extensive shale gas and oil resources, which include the mammoth Vaca Muerta ("Dead Cow") formation in southern Argentina, thought to hold an estimated 23 billion barrels of oil equivalent.

Galuccio did not specify how big the deals with the two new partners would be, but estimated the area on which Bridas was looking to partner would cost an initial $2 billion to develop, with the full development of the block costing $10 billion.

"It's a farm-in type of agreement where they (the partner) will carry YPF for a few years," he said.

So-called "farm-in" deals enable a company to take a share of an oil or gas block in return for funding a portion of the exploration and development costs.

Bridas Holding's owner Carlos Bulgheroni, a South American oil mogul, told Reuters on Thursday that his company was considering making a substantial investment in YPF. Asked if the investment would be in the range of $500 million, he said, "much more".

Bridas Corp., half owned by Bridas Holding and half by China's CNOOC, holds 40 percent of Argentina's Pan American Energy. The remaining 60 percent is held by BP.

YPF's $30 billion plus investment costs for the next five years will be helped by a rise in wellhead gas prices recently announced by the Argentine government to attract foreign investment into shale gas.

"This will help the bottom line," Galuccio said, calling the new gas price of $7.50 per million British Thermal Units "very competitive", and adding that it would help bring about a "step change" in investment in gas in Argentina.

The company will also seek funding from the international bond market, Galuccio said, announcing plans to tap the market for up to $500 million in the first or second quarter next year.

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