Energía YPF


YPF Aims to Speed Up Non-Conventional Oil, Gas Development, CEO Says


CANCUN, Mexico--Argentina's YPF SA YPFD.BA +3.20% has shown the viability of the massive Vaca Muerta shale formation through a pilot project with Chevron Corp., and has new projects in the works as the country seeks energy self-sufficiency, YPF Chief Executive Miguel Galuccio said Friday.

"We have managed in 18 months to create the second-largest fields in terms of production in Argentina," Mr. Galuccio said in an interview with The Wall Street Journal. "So you have a showcase. The key for Argentina now is to replicate this and to accelerate the development of [unconventional energy resources]."

The $1.2 billion pilot project last year at the Loma Campana fields is being expanded this year, in which the two oil companies plan to spend $1.8 billion in a 50-50 split, Mr. Galuccio said on the sidelines of an oil conference in Mexico. Since Argentina doesn't have rich conventional resources like Venezuela or Mexico, YPF aims to become a leader in non-conventional resources with the help of outside partners, he said. The company has new pilot projects in the works with other foreign firms, he added.

Mr. Galuccio said that since YPF was nationalized two years ago, investment in exploration and production has risen by 66% to about $4.5 billion last year. Drilling activity has increased and both oil and natural-gas production have posted solid gains, he said.

"If you do a benchmark, you will not find many companies in Latin America that can grow 6% in oil output nor one that can grow 30% in the output of gas," he said. "This is an extraordinary result."

The company's second-quarter output reached 241,000 barrels a day of crude oil and about 43.5 million cubic meters (about 1.5 billion cubic feet) of natural gas, which is still modest compared to leading South American oil producing nations like Brazil.

Mr. Galuccio said that YPF has also been able to borrow money at a lower rate than the Argentine government, which continues to be punished by international markets for its debt-default saga. Even then, the firm's last debt placement of about $1 billion carries interest of 8.2%, which is "expensive money," he added. Argentina expropriated a 51% stake in YPF from Spain's Repsol in 2012, arguing the Spanish company hadn't invested in exploration and production.

Mr. Galuccio, who became chief executive the same year, has been a key proponent of Argentina's plans to push new energy legislation through Congress that would make investing in the country less expensive. Among other things, the legislation would unify investment and taxation rules across provinces, capping certain provincial and municipal taxes and fees.

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