Argentina: Major Shale Oil Strike for YPF

Argentina has announced that its largest oil and gas company, YPF SA, has made a major shale (unconventional) oil discovery.

YPF CEO Sebastian Eskanazi emphasized the importance of the find as shale oil is a new energy.  YPF will raise its reserves by 35%.

150 million barrels of crude oil were found in the Loma La Lata field in southwestern province of Neuquén.

Neuquén is a key producing area for YPF, accounting for 53% of the firm's proven crude oil reserves and 72% of its proven gas reserves at the end of 2010, according to YPF's 20-F filing with the U.S. Securities and Exchange Commission.

YPF started drilling what it says is the country's first shale oil well last October with a view to prove the productivity of the source rock in the Vaca Muerta formation as an unconventional oil reservoir.

Today’s announcement is the biggest oil find in almost 20 years. The find will increase Argentina's oil reserves by 8%, according to Planning Minister Julio De Vido.

YPF is attracting renewed investor interest at the same time its controlling shareholder, Repsol of Spain, prepares to boost the company's free float by selling an additional 3% stake on the local market.

Repsol YPF aims to reduce its stake in the Argentine firm to 51% from the current 58.23% as part of a broader plan to trim its exposure to Argentina in favor of more attractive markets, like Brazil.

Last week, Argentina's Eskenazi family through their Grupo Petersen holding company exercised an option to buy an additional 10% stake of YPF. Grupo Petersen now owns 25% of YPF.

Oil and gas prices are heavily regulated in Argentina, which critics say has deterred investment in exploration.  The presence however of the Eskenazis in YPF dovetails with President Cristina Fernandez's stated desire to see greater Argentine control of key industries following a wave of privatizations in the 1990s that saw many state companies pass into the hands of foreign investors.

Source: Dow Jones Newswires, Marketwatch