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By: Pablo Gonzalez

Chevron Corp. (CVX), the world’s second-largest energy company by market value, will invest in Argentine shale oil and natural gas fields by bringing dollars into the country and exchanging them at the country’s official rate, said state-run energy company YPF SA.

In a presentation of the $1.24 billion shale partnership with Chevron yesterday, YPF Chief Executive Officer Miguel Galuccio said the San Ramon, California-based company won’t use pesos held in Argentina to fund the investment.

“It is a myth Chevron will use pesos,” Galuccio said. “Chevron will bring real dollars and will sell those dollars in the official market.” In Argentina’s illegal street market the U.S. dollar costs about 9.55 pesos, compared with the official rate of 5.66.

Chevron’s initial $300 million payment to YPF for wells drilled will arrive “sooner than people can imagine,” Ali Moshiri, the head of Latin America, Middle East and Africa for Chevron, said at the same presentation. The remainder is expected to arrive during the next 10 to 12 months in accordance with the pace of the shale operations, he said.

Since taking office in 2007, Argentina’s President Cristina Fernandez de Kirchner tightened control of the foreign exchange market by limiting exports, forcing companies to repatriate money held abroad and banning most purchases of foreign currency.

Investment Recovery

The YPF-Chevron accord doesn’t contain any price guarantees or secret clauses and will be governed by U.S. and Argentina laws and any disputes would go to the International Chamber of Commerce in Paris for arbitration, YPF said in the presentation. Chevron would recover the shale investments around the ninth year of the concession, according to the presentation.

The next step for YPF will be to hammer out a shale gas joint venture, Galuccio said. Companies in line to sign similar accords include Dow Chemical Co. (DOW), Bridas Corp., which is a joint venture between the billionaire Bulgheroni brothers and China’s CNOOC Ltd. (883) and Argentine billionaire Eduardo Eurnekian’s Corporacion America. Galuccio said that a shale deal to produce in Vaca Muerta’s El Orejano area may be sealed this year. He also said the memorandum of understanding signed with Bridas has expired.

Shale Production

Yesterday, the Chevron-YPF venture received final approval from Argentina’s southwestern province of Neuquen to develop the Vaca Muerta formation, which holds the world’s second-largest deposit of recoverable shale gas.

YPF’s plan submitted to Neuquen’s legislature, to which Bloomberg had direct access, specifies the venture will drill 115 wells expecting output of 11 million barrels of oil in the first year. After the first stage ends, Chevron will have an option to continue the accord, which encompasses as much as $16 billion in spending, until 2048.

From the second to 35th year, the venture would drill 1,562 wells to produce 782 million barrels at a rate of 23.7 million of barrels a year on an investment of $15.4 billion, according to YPF’s plan.

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