From Bloomberg News last week:

By Pablo Gonzalez

Chevron Corp. (CVX), the second-biggest U.S. oil company, said it’s preparing an investment that will help make the country energy independent by developing what could be the world’s second-largest shale oil reservoir.

“Some people think China is the second-largest shale oil,” Ali Moshiri, Chevron’s head of Latin America, Middle Eastand Africa, told reporters yesterday in Buenos Aires. “I believe after the U.S., Vaca Muerta holds the largest shale oil in terms of reserves,” he said, referring to a formation in southwestern Argentina that translates to Dead Cow.

Moshiri spoke along with Miguel Galuccio, chief executive of state-owned YPF SA, after signing a contract establishing terms for a definitive agreement that will start with a $1.5 billion investment and may reach as much as $15 billion. The San Ramon, California-based company first agreed to the partnership in December.

“Now it is the time for finalizing details as there are no significant commercial issues between the two companies,”Moshiri said.

Both executives declined to provide details of production targets and capital expenditures. The final accord may be completed as early as July as two teams of six members each are writing the fiscal terms and other covenants, they said.

YPF gained 1.7 percent to 121 pesos at 2:45 p.m. in Buenos Aires. The stock earlier rose as much as 8.3 percent to 128.90. Chevron added 0.07 percent to $123.09 in New York.

Frozen Assets

“Once we sign the deal, we will immediately allocate a large sum of money to take the investment to the next level,”Moshiri said. “We are going to provide whatever YPF asks to reach the target.”

Moshiri said Chevron is spending $150 million a year even while an embargo linked to an Ecuadorean lawsuit froze 40 percent of its accounts in Argentina. The lawsuit against Chevron stems from a $19 billion award for pollution in Ecuador.

“Chevron will continue reinvesting all the money it makes in Argentina,” Moshiri said, declining to elaborate how the company will avoid having its funds seized. “At the end of the day the right decision will be made by the people in Argentina, the government and the judiciary system.”

Argentine President Cristina Fernandez de Kirchner’s government seized a 51 percent YPF stake from Spain’s Repsol SA (REP)in April 2012 to stem fuel imports that doubled to $9.4 billion in 2011 and are expected to rise to as much as $15 billion this year.

Repsol Lawsuit

Another legal dispute threatening the agreement is a suit filed in November in Madrid by Repsol against the U.S. company. The Repsol lawsuit is an issue between shareholders, Galuccio said. “There is a lot of goodwill from both sides to reach an agreement, nevertheless, as YPF CEO I couldn’t comment further,” he said.

“Repsol is open to a negotiation that includes liquid assets as compensation,” Kristian Rix, a spokesman for the Madrid-based company, said today by telephone from Madrid.

Galuccio and Moshiri said they would only discuss the future of Vaca Muerta now that YPF has cut well costs in half to $7.5 million apiece. On May 14, the two executives visited YPF’s shale operations, which has 35 operating rigs and is expecting to receive four more this week.

YPF said it’s pumping 7,000 barrels of oil a day, up from 4,000 in January. Vaca Muerta may hold at least 23 billion barrels of oil equivalent, according to a report by independent auditor Ryder Scott released in February 2012 by YPF. Argentina holds the world’s third-largest shale gas reserves, according to U.S. Energy Information Administration data.

“If you look at Vaca Muerta in the future, in 30, 40 years, you will be looking at a factory drilling operation,”Galuccio said. “We are working on industrializing the process as that will be the key for Argentina to develop those resources we have on the ground.”