(Adds details on Argentina policy changes, Chevron's Latin
By Ernest Scheyder and Hugh Bronstein
NEW YORK/BUENOS AIRES, April 10 Chevron Corp
and state-controlled YPF SA plan to spend an
additional $1.6 billion to develop Argentina's Vaca Muerta shale
formation further, boosting plans for new wells this year and
announcing fresh exploration projects.
The project, announced on Thursday, will help Chevron boost
its oil and natural gas production, which has been stubbornly
flat the past few years despite annual global capital spending
of around $40 billion.
It should also help ease concerns about foreign investment
in Argentina, which was widely castigated after President
Cristina Fernandez expropriated Repsol SA's majority
stake in YPF two years ago, and should give the country fresh
capital to develop one of the largest energy reserves in the
Since the start of the year, Argentina has made policy
changes that have caught the eye of international investors
while sparking a rally in local stocks and bonds. The shifts
have included heating gas subsidy cuts of 20 percent, an 18
percent currency devaluation and a deal to pay Repsol $5 billion
for the YPF nationalization.
Chevron and YPF began drilling in the region last year, with
Chevron agreeing to spend $1.24 billion for YPF to drill 161
wells as the project's operator, a deal that was widely seen as
a test phase by Wall Street.
Chevron and YPF said on Thursday they would jointly spend an
additional $1.6 billion to drill 170 wells this year, up from
previous estimates for 140 wells this year.
Additionally, Chevron will spend $140 million to explore the
Narambuena region of the Vaca Muerta.
Chevron sought to characterize the announcement as a vote of
confidence in the first phase of the project and its high
expectations for future production.
"YPF is a reliable partner and operator that is advancing
the project in the right direction," Ali Moshiri, Chevron's head
of African and Latin American exploration and production, said
in a statement.
Moshiri is under pressure to show results in Latin America
because of slumping production in Venezuela and a protracted
legal fight with Ecuador that shows little signs of abating.
Big oil companies, like Chevron, also have had a mixed
record of developing shale deposits around the world, with their
large bureaucracies often moving slower than small, more-nimble
start-up companies to develop unconventional oil and natural gas
Chevron, which has called Vaca Muerta one of the world's
most exciting shale plays, has previously forecast production
there could jump from around 15,000 barrels of oil equivalent
per day at present to 80,000 boed by 2017.
Chevron's decision "is a great demonstration of confidence
in the work of YPF and the potential of unconventional
hydrocarbons of Argentina," Miguel Galuccio, YPF's chief
executive officer, said in a statement.
The company, which is 51 percent controlled by Buenos Aires,
is seen as crucial in helping the South American nation achieve
Argentina unveiled a new consumer price index this year that
more accurately measures stubbornly high inflation, which has
also hampered energy development.
From 2007 through the end of last year the government
reported inflation at about half the rate estimated by private
economists. The lack of credibility of official data took a toll
on business confidence already battered by falling central bank
reserves and heavy-handed currency controls meant to clamp down
on access to U.S. dollars.
Argentina's stock market has rallied 20 percent so
far this year on the back of Buenos Aires' shift toward more
investment-friendly policies, while locally traded government
debt prices have risen 11 percent.
The country, however, remains home to one of the world's
highest inflation rates, estimated at over 30 percent. Central
bank reserves have fallen 32 percent to $27.6 billion over the
last 12 months, triggering criticism from the International
Monetary Fund and a credit rating downgrade from Moody's.
Shares of Chevron were down 1.6 percent at $117.25, and YPF
fell 1 percent to $30.25 on the New York Stock Exchange early
(Reporting by Ernest Scheyder in New York and Hugh Bronstein in
Buenos Aires; Editing by Lisa Von Ahn, Matthew Lewis and Richard