Chevron challenges Argentina over YPF

By Ed Crooks in New York and Jude Webber in Buenos Aires

Chevron, the US oil group, has taken a tough line with Argentina, saying it will not make any progress on an agreed joint venture with YPF, the country’s national oil company, until a court threat to its assets has been lifted.

The US company’s stance is a blow to the Argentine government’s hopes of forming a partnership with a leading international oil company to help develop its vast shale reserves.

In November, an Argentine judge agreed to freeze many of Chevron’s assets in the country to enforce an Ecuadorean court order awarding $19bn to villagers suing over pollution in the Amazon region.

The following month, Chevron agreed a preliminary deal with YPF for a $1bn joint venture that would drill 100 wells in Argentina’s Vaca Muerta shale oil formation.

YPF had hoped to have the deal finalised by April, but George Kirkland, Chevron’s vice-chairman, told the Financial Times the venture could not go ahead while the freeze was still in effect.

“We can’t move forward with a deal as long as this is hanging out there, because they’d embargo moneys that we would bring in to spend. So we wouldn’t be able to do anything anyway,” he said.

YPF, which was brought under Argentine government control by nationalisation without compensation last year, had hoped the venture would provide expertise and financing to develop badly-needed sources of domestic oil and gas production.

Mr Kirkland said: “We think it’s a good opportunity. We’d like to work with them, but . . . you have to look at it from our perspective: this is our money.”

Chevron has alleged that the Ecuadorean claim is fraudulent, a claim that is rejected by the plaintiffs and returned with allegations of fraud against the company.

Mr Kirkland acknowledged that the Argentine government could not compel the court to drop the case. “We’ve got to try to move it through the court system,” he said.

Chevron plans to take the case first to an appeals court and ultimately to Argentina’s supreme court if necessary.

Miguel Galuccio, YPF’s chief executive, told reporters this week that Chevron teams had already been in Argentina working on the partnership deal, which was “pretty advanced”, in spite of doubts about the effect of Chevron’s legal problems in Argentina.

“These are all doubts I have had too. But [Chevron’s] commitment exists. If we have to look for a different model [we will], but their commitment is as strong as it was at the outset,” he said.

Financial Times