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Argentina's YPF defends partnership with Chevron in wake of court ruling

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(GlobalPost/GlobalPost)

Buenos Aires, May 15 (EFE).- Argentine state-controlled oil company YPF on Thursday defended the partnership deal it reached with U.S. energy supermajor Chevron Corp., two days after a court ordered a probe into alleged irregularities associated with the pact.

"We have to avoid a short- and narrow-minded view of reality. The long term and strategic vision cannot be just a matter of words. Without energy, there is no possibility for the sustainable development of Argentina," YPF CEO Miguel Galuccio said in a letter published Thursday in the Argentine media.

A federal court this week ordered an investigation of President Cristina Fernandez for alleged abuse of authority in connection with YPF's pact with Chevron to develop the massive Vaca Muerta shale formation.

It handed down the ruling in response to a complaint filed last year against a decree issued by Fernandez, who allowed energy companies that invest at least $1 billion over five years to avoid export taxes on up to 20 percent of their oil and gas output.

YPF said this week's court ruling did not question the project to develop Vaca Muerta but merely "formal matters" related to the pact.

"Argentina needs to attract significant investment" in order to capitalize on its resources and must choose between buying energy from third parties - which involves sending foreign currency abroad, at the risk of accentuating the devaluation of the peso - or inviting "the world's leading companies" to invest in the country, according to Galuccio.

"The president understood that what's at stake are our future generations and entrusted this mission to us," the YPF boss said, adding that Argentina currently ranks second globally in terms of growth of non-conventional energy production.

"YPF signed the agreement with Chevron, not the president," Galuccio said, while also praising the government's strategy of striving for energy self-sufficiency.

A federal appellate court in Buenos Aires on Tuesday overruled a decision by lower-court prosecutor Eduardo Taiano, who had dismissed the complaint filed by opposition lawmakers against Fernandez for "abuse of authority, breach of public duty and potential environmental damage."

The complaint referred to the pact signed on July 16, 2013 - just a day after Fernandez's decree - between YPF and Chevron for a pilot program in the Loma Campana area, part of the Vaca Muerta shale formation.

That pilot stage involved an investment outlay of $1.24 billion to drill 161 wells and develop a 20-sq.-kilometer (7.7-sq.-mile) area.

The second phase of the Vaca Muerta project will involve drilling some 1,500 wells to develop a 395-sq.-kilometer (152-sq.-mile) area.

With that expanded effort, the companies expect to achieve daily production of 50,000 barrels of oil and 3 million cubic meters of associated natural gas.

Current production at Loma Campana stands at 20,000 barrels of oil equivalent per day.

http://www.globalpost.com/dispatch/news/agencia-efe/140515/argentinas-ypf-defends-partnership-chevron-wake-court-ruling