By Taos Turner 
 

BUENOS AIRES--Chevron Corp. (CVX) has confirmed plans to continue investing in Argentine shale oil and gas along with its local partner, state-run energy company YPF SA (YPF, YPFD.BA).

Chevron has an agreement with YPF to fund most of a $1.5 billion joint venture to develop vast but largely untapped shale oil and gas deposits located in an area in southern Argentina known as Vaca Muerta, or "dead cow" in Spanish.

"This is a significant step in our subsidiaries' joint efforts with YPF to develop one of the most exciting shale plays in the world today," George Kirkland, Chevron's vice chairman, said Thursday. "Vaca Muerta could become an important contributor to Chevron's long-term production growth."

Chevron's decision to further invest in the project comes after a trial phase in which the U.S. company could have opted out of the joint venture.

The first phase of the project includes drilling more than 100 wells through 2014. Under a second phase, the joint venture would drill 1,500 wells with the aim of increasing production to 50,000 barrels of oil and 3 million cubic meters of natural gas a day.

Chevron is the first major international oil and gas company to commit significant money to Argentina's shale oil and gas industry, which could someday turn the country into an energy exporter. For YPF, the Chevron deal is a key part of its plan to increase production and reduce Argentina's dependence on imported natural gas and fuel.

YPF Chief Executive Miguel Galuccio has said that "many Chevrons" are needed for Argentina to fully tap all of its oil and gas potential and become energy independent.

Argentina ranks second in the world, behind China, in potentially recoverable shale-gas reserves, with 802 trillion cubic feet, according to a study last month by the U.S. Energy Information Administration. Argentina also ranks fourth in shale oil with an estimated 27 billion barrels.

Mr. Galuccio, who was a top executive at oil services company Schlumberger before coming to YPF, has actively tried to attract foreign investment in Argentina. He recently held talks with Petroliam Nasional Bhd, or Petronas, Malaysia's state oil and gas company, to strike a deal similar to the one YPF has with Chevron.

YPF's shares traded in New York closed 1.8% lower at $30.10 Thursday.

Write to Taos Turner at taos.turner@wsj.com

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