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YPF’s CEO Says Pemex Would Make Good Vaca Muerta Shale Partner

YPF SA Chief Executive Officer Miguel Galuccio said Argentina’s nationalized energy company is willing to form a partnership with Mexico’s state-run Petroleos Mexicanos to develop shale oil and natural gas deposits in the Vaca Muerta formation.

“YPF is open to generate all the agreements needed to put in production the huge resources from Vaca Muerta and Pemex could be a good partner,” Galuccio said in an e-mailed response to Bloomberg questions.

After YPF sealed its first shale accord with Chevron Corp. (CVX) on July 16, Galuccio said Argentina needs more partners like the San Ramon, California-based company to stop a production decline that contributed this year to the biggest plunge in central bank reserves since 2002. Energy imports, which doubled to $9.4 billion in 2011 from a year earlier, rose to $10.5 billion in 2012 and are forecast by ex-Economy Minister Roberto Lavagna to climb to $15 billion this year.

“In order to develop reserves we need investments from partners to revert the natural decline of fields,” Galuccio said yesterday. “The development of shale gas and oil requires a huge amount of cash and the sharing of risks and expertise.”

In April 2012, Argentina’s President Cristina Fernandez de Kirchner seized control of YPF from Spain’s Repsol SA. Mexico City-based Pemex is a minority shareholder in Repsol.

Galuccio said he has had “many business meetings in the last few months” with Pemex’s CEO Emilio Lozoya. Pemex’s press office in Mexico City didn’t immediately reply to an e-mail seeking comment today.

Tax Incentives

Argentina, which holds the world’s second-largest shale gas reserves and the fourth-largest shale oil reserve, according to U.S. Energy Information Administration data, is offering tax and export incentives for energy companies that invest at least $1 billion over a five-year period.

Pemex, the world’s fifth-largest crude oil producer, is also experiencing a decline in production at mature fields as it heads to a ninth straight year of falling output. After Pemex’s July output slid to the lowest monthly level in almost 18 years, Mexico proposed an energy reform that would end a seven-decade state energy monopoly on Aug. 12.

Mexico has untapped shale-gas reserves that may be as much as 460 trillion cubic feet, according to data compiled by Pemex. The Mexican producer has 175 shale exploratory opportunities identified in five areas, according to a quarterly presentation.

To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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