At a shareholders meeting that ended in the early morning,
YPF decided to sue Repsol Chairman Antonio Brufau for
allegedly overpaying YPF’s board members between 2003 and 2011,
a statement posted on Argentina’s presidential website showed.

Repsol threatened to take legal action in response and
defended the salary payments, saying they complied with
Argentine law. Repsol also said YPF planned to target all the
board members, not just Brufau, who was chairman at the time.

YPF estimated that $38 million was paid to board members
without shareholders’ approval, saying its lawsuit “will hold
Brufau personally responsible for the harm caused to the
nationalized company”, the government statement said.

Argentina seized 51 percent of YPF from Repsol one year ago,
accusing the Spanish company of falling short on investment.
Repsol has sued Argentina for compensation of about $10 billion
but nothing has been resolved so far.

Brufau said the lawsuit was aimed at diverting attention
from YPF’s difficulties in boosting oil and gas production.

“You will have seen in the press that they have filed a
lawsuit or a civil complaint against the chairman and those who
have been involved in this situation,” Brufau said at Repsol’s
annual shareholders meeting in Madrid.

“The historic position of Repsol and YPF has always been
that the YPF general shareholders assembly must approve the
allowances and fees of the board of directors but not the
salaries of the executives that form part of the board,” Brufau
said.

“This is backed by legislation, by lawyers’ reports and by
auditors.”

The Latin American country’s lack of funds and its limits on the control private firms have over their investments – which could deter Repsol from accepting other assets in any settlement – pose major obstacles to a deal, according to analysts.

Argentine President Cristina Fernandez expropriated Repsol’s majority stake in YPF (YPFD.BA: Quote, Profile, Research, Stock Buzz) last May, accusing the firm of investing too little. Repsol denied the charges and filed lawsuits against the country for a loss valued at $10.5 billion.

A year later the Argentine government, keen to rebuild relations with foreign investors and attract funds to develop a vast shale field, has held talks with a major shareholder in Repsol over a possible deal to side-step a long legal battle, a source familiar with the matter told Reuters.

Repsol has officially denied any involvement in talks with Argentina but says it will keep all avenues open for settlement.

The Spanish government, eager to protect the investments of other companies like Telefonica (TEF.MC: Quote, Profile, Research, Stock Buzz) in Argentina, has also said it would listen to options to settle the YPF dispute.

Repsol’s chief financial officer, Miguel Martinez, said earlier this month it would be open to a mixed package including cash, cash equivalents or liquid assets.

One asset option tipped by analysts is a stake in YPF’s valuable Vaca Muerta, or “dead cow”, shale field.

But for such an asset to be liquid, as Repsol demands, the Argentine government would have to revise laws that limit private firms’ control over their investments, a change some analysts say is unlikely while Fernandez is in power.

Presidential elections are not due until 2015.

Analysts are also doubtful about Argentina’s ability to pay Repsol any compensation. Dollars are scarce in the country and central bank reserves are down by 10 percent so far this year.

In 2012 the economy cooled abruptly after booming during most of the previous decade.

“Argentina is in no condition to pay outright. The government could propose paying by way of an installment plan. But considering the state of YPF and the country’s reserve position, the payment period would have to be a long one, perhaps of about 10 years,” said Rodolfo Rossi, former head of Argentina’s central bank.

Argentine officials were not available for comment.

ARGENTINE TANGLE

Even if Repsol were offered a stake in Vaca Muerta, which is still in preliminary stages of development, analysts have questioned the wisdom of returning and trying to do business with a government with which it has been at odds.

“The current legal framework has the ingredients of Repsol potentially being ‘trapped’ in the country,” Credit Suisse said in a research note.

After losing YPF, Repsol launched a new strategy with exploration projects focused in countries such as the United States, Spain, Brazil, Russia, Bolivia and Trinidad and Tobago.

So far the new plan has driven an 11 percent growth in first-quarter production to 360,300 barrels of oil equivalent (boe) per day and put the company firmly on track to beat a 2016 target for 500,000 boe.

“We think Repsol would be better off spending funds elsewhere, where potential returns are far better,” Credit Suisse said.

Not holding its breath for an out-of-court settlement, Repsol’s Martinez said it would continue to pursue legal action.

The company filed a claim against Argentina with the World Bank’s International Court for Settlement, known as the ICSID, in December 2012, and also has legal cases open in a New York court, a Spanish court and an Argentine court.

However, legal compensation is likely to take time.

On average, ICSID cases last 3.2 years from the date of registration. Argentina is the country with the most ICSID claims against it, and has failed to pay fines from previous judgments by the arbitration body.

Analysts do not currently include any estimates for YPF compensation in their valuations of Repsol, so any settlement could boost a share price that has recently recovered to the level it was trading soon before the YPF seizure.

MONEY FOR VACA MUERTA

Last week YPF signed an agreement with U.S. oil firm Chevron (CVX.N: Quote, Profile, Research, Stock Buzz) for an up to $1.5 billion investment in Vaca Muerta, located in Argentina’s southern Patagonia region.

The deal, expected to be signed in July, has run into obstacles because of Chevron’s own legal battle with Ecuador, which has an embargo on the California-based company’s assets.

However, Chevron’s president of Latin American and African operations, Ali Moshiri, said the suit does not affect the deal.

YPF declined to comment.

If the Chevron agreement goes through, BES analyst Filipe Rosa said it could reduce pressure on Argentina to settle compensation with Repsol over the YPF expropriation.

Repsol has lodged a suit against Chevron and has threatened to sue any company that tries to make a profit out of Vaca Muerta, an asset it continues to claim. The potential value of the field is estimated from $7.5 billion to as much as $90 billion, if it were to achieve $25 billion per year in investments to develop the prospective resources.

Repsol had signed at least 15 memorandums of understanding with potential strategic investors in the months before the YPF nationalization to spend an annual $25 billion on the field, according to Repsol documents about the YPF seizure.

(Additional reporting by Andres Gonzalez; Editing by Mark Potter)

Videla was the first president to head the military junta that “disappeared” thousands of suspected leftists from 1976 to 1983, and he spent his final years behind bars for human rights crimes, including the systematic theft of babies born to political prisoners in secret torture centers.

He died of natural causes in his jail cell in a prison outside the capital, Buenos Aires, a government spokesman said.

“He spent his life doing great damage, which left a mark on the life of the country,” Argentine human rights activist and Nobel Peace Prize winner Adolfo Perez Esquivel told Reuters. “His death ended his physical presence but not what he did to the country.”

Rights groups say up to 30,000 people were “disappeared” – a euphemism for kidnapped and murdered – during the dictatorship, which began in March 1976 when Videla and two other military leaders staged a coup against President Maria Estela Martinez de Peron, the widow of former leader Juan Domingo Peron.

Videla was born in the town of Mercedes to a middle-class family in 1925. He followed in the footsteps of his father, an army colonel, enlisting in the military academy where he was well-respected.

Following the coup of 1976, the mustachioed Videla headed a three-man military junta and he led the country until 1981.

The junta pledged to end left-wing subversion, put the economy in order and respect human rights. Videla said several times that the aim of his government was to return Argentina to democracy.

However, he conditioned that on the “Process of National Reorganization,” in which the military planned to foster sweeping reforms to reduce the state’s role in the economy and rid Argentina of the influence of former strongman Peron.

He quickly suspended the normal functions of Congress, local government and the Supreme Court, and oversaw the worst excesses against those suspected of left-wing activities.

It was also the government of “sweet money” when Argentines briefly enjoyed the benefits of the monetarist policies of Economy Minister Jose Martinez de Hoz. He did away with import tariffs and revalued the peso against the U.S. dollar, helping Argentina build up a $50 billion foreign debt.

When Videla was succeeded by army chief Roberto Eduardo Viola in 1981, the political balance inside the armed forces began to crumble but Argentina was still deeply entrenched in military rule.

It remained so until the catastrophe of the Falklands War against Britain in 1982 eroded the military’s power.

Only four years after leaving Argentina’s presidential palace, with the democratically elected government of President Raul Alfonsin in office, Videla was sentenced to life in prison for human rights abuses under his rule.

He spent just five years behind bars because of a pardon granted in 1990 by then-President Carlos Menem. But eight years later, a judge scrapped the pardon.

More “dirty war” cases were opened in Argentina during the 2003-2007 presidency of Nestor Kirchner and in subsequent years, and Videla was given several life sentences.

During a trial in 2012, Videla was sentenced to 50 years in prison for being the architect of a systematic plan to steal babies from prisoners at clandestine detention centers.

An unrepentant Videla described himself as a “political prisoner” during the trial.

“The women giving birth, who I respect as mothers, were militants who were active in the machine of terror,” the former dictator said in his closing remarks. “Many used their unborn children as human shields.”

(Reporting by Hugh Bronstein and Karina Grazina; Editing by Kieran Murray and Eric Beech)

The company has signed an agreement with Argentine
state-controlled oil firm YPF, setting the stage for
Chevron to invest up to $1.5 billion in Vaca Muerta,
located in Argentina’s southern region of Patagonia.

“You look at Argentina from the geological point of view,
and it is No. 2 Some people say China is number two, but really
if you look at the geological and volumetric from the shale oil,
Argentina is number two,” Moshiri told reporters late on
Wednesday.

The development of Vaca Muerta, which means “dead cow” in
Spanish, is still in the preliminary stages. The final
YPF/Chevron agreement should be signed in July, once outstanding
trade and tax issues are hammered out, Moshiri said.

A U.S. Department of Energy report has shown Argentina holds
more natural gas trapped in shale rock than all of Europe – a
bounty estimated at 774 trillion cubic feet.

YPF, which was renationalized last year as Argentina battles
to reverse a long decline in natural gas and oil output, aims to
drill 132 oil wells at the Vaca Muerta shale formation in
Patagonia this year.

YPF’s former parent company, Spain’s Repsol, filed
a lawsuit late last year to block the YPF/Chevron deal, and vows
to take action against any company that partners with YPF after
Argentina seized control of the company from Repsol in 2012.

The lawsuit added to a handful of high-profile legal battles
for Chevron in South America, including its year-long tussle in
Brazil following an offshore spill there and a two-decade
international fight over rainforest pollution in Ecuador.

Moshiri said the highly-publicized Ecuador suit should not
interfere with the California-based company’s investment plans.

“We are hoping that we will able to resolve the legal issue
but that doesn’t stop our progress in terms of commercial
decisions,” Moshiri said.

Argentina last month created a fund of up to $2 billion to
help develop the 7.4-million acre Vaca Muerta shale field. That
funding will come from central bank reserves, which the
government also taps periodically to make debt payments.

Unconventional energy fields need greater investment than
conventional resources due to the complexities of extracting the
natural gas and crude from rock formations.

In contrast to the United States, where shale production has
boosted natural gas production, most of the Argentine drilling
to date has targeted oil.

One week ago, flash floods sparked a fire inside YPF’s La
Plata refinery, which had capacity of 28,500 cubic meters of
crude per day. The blaze severely damaged a coke oven and will
force the state-controlled company to boost fuel imports.

The refinery is currently processing 4,000 cubic meters per
day of crude, and another topping unit with capacity to refine
16,000 cubic meters more per day should be functioning within
the coming week, Galuccio told a news conference.

Once the damaged topping unit C is back on line, within 45
days, refining capacity will reach 24,000 cubic meters a day.

“The difference between 24,000 and 28,500 is the deficit
that we have because of the loss of coke oven A,” Galuccio said.

He said YPF aims to speed up construction of a new, $800
million coke oven, which has already been approved by the
company’s board of directors.

“Part of the equipment was already purchased … but of
course today we need to accelerate the construction and
operation of this coke oven, so therefore we’re looking at how
aggressive we can be (on this),” Galuccio said.

YPF was importing fuel that represented about 10 percent of
what the company produced itself, and Galuccio said that ratio
could increase to 15-16 percent due to slowed output at the La
Plata refinery.

Argentina’s government renationalized YPF last year to try
to reverse a long decline in natural gas and oil output. The
company aims to boost oil and natural gas production 32 percent
by the end of 2017.

Flags flew at half-staff on the Falklands after news of Thatcher’s death on Monday aged 87. The head of the local legislative assembly said it was a day of great sadness and another resident praised her as “our Winston Churchill.”

In Buenos Aires, however, one resident named Jose Raschella, 48, said: “I hope God can forgive her because I can’t.”

Thatcher sent a task force to recapture the islands, known in Argentina as Las Malvinas, in an operation she considered one of the triumphs of her 1979-1990 rule.

Argentina still presses its sovereignty claim over the Falklands and in the past year has stepped up rhetoric against Britain despite a referendum last month in which the islanders overwhelmingly voted to stay British.

“There’s absolutely no doubt that Mrs. Thatcher had a special feeling for the Islands, she led a very difficult recapture of the Islands … and the Falklands were always in her heart,” Mike Summers, chair of the Falklands’ eight-member assembly, told Reuters by telephone from Port Stanley.

“She’s a very much revered person in the Falklands for leading our return to freedom in 1982, and it will be a day of great sadness for Falkland Islanders.”

Summers said a memorial service would be held but it was not yet clear when.

The barren and windy islands off the tip of Patagonia, at the southern end of South America, have a population of around 2,500.

‘WAR CRIMINAL’

About 650 Argentines and 255 Britons were killed in the 1982 war, which started when Argentina’s military leaders of the time ordered the invasion on April 2 and ended with the recapture of Port Stanley by British troops on June 14.

The defeat helped bring an end to Argentina’s dictatorship and many Argentines today see the war as a doomed and cynical move by the military leaders who murdered and “disappeared” thousands of their own people in a “dirty war” against suspected leftists.

Nonetheless, most Argentines are convinced the islands belong to their country, viewing the issue as a patriotic cause.

President Cristina Fernandez has piled pressure on Britain to negotiate the sovereignty of the islands – something London refuses to do unless the islanders themselves request talks.

Thatcher’s death stirred up angry memories in Argentina. On Twitter, left-leaning political groups celebrated the demise of a “war criminal.”

“The pain that she left our country can’t be erased, we’ll never forget all that pain,” said Raschella, a musician.

Carlos Grillo, a 63-year-old shop owner in Buenos Aires, said he had mixed feelings.

“I hated her at that time, so I can’t be impartial. I can’t say ‘I’m sorry (she died).’ I’m not sorry,” Grillo said. “But that goes against my Catholic faith, so I can’t say I wanted it to happen either.”

The Argentine government made no official comment.

‘RIGHT PERSON, RIGHT TIME’

Tim Miller, 60, owner of a Falkland Islands garden center and store that sells patriotic gifts and memorabilia, recalled the 1982 conflict.

“For me, she was for the Falklands what Winston Churchill was to Great Britain in 1940. She was the right person in the right place at the right time and did the right thing.”

Miller acknowledged that she was a divisive figure in Britain. “But to the Falklands she was our Winston Churchill.”

In Buenos Aires, while most people were pleased or indifferent about Thatcher’s death, Alcides Francesco expressed some admiration for the British leader.

“She was an English patriot,” the 65-year-old worker said. “If we’d had several Margaret Thatchers here, the Falkland Islands would be ours.”

(Editing by Kieran Murray and Frances Kerry)

Links between some high-ranking Roman Catholic clergymen and the military regime that kidnapped and killed up to 30,000 leftists between 1976 and 1983 tarnished the Church’s reputation in Argentina and the wounds have yet to heal.

Critics of Bergoglio, the Jesuit former archbishop of Buenos Aires, say he failed to protect priests who challenged the dictatorship, and that he has said too little about the complicity of the Church during military rule.

That is reason enough for some human rights activists to question the moral credentials of Pope Francis, or Francisco as he will be known in the Spanish-speaking world.

“He has never said anything about the genocidal priests … We’ve really never heard him say anything,” said Taty Almeida, one of the leaders of the Mothers of the Plaza de Mayo, who marched for years before the presidential palace to demand information on their missing children.

Bergoglio’s harshest critics go much further.

“He turned priests in during the dictatorship,” said Horacio Verbitsky, a journalist and author close to President Cristina Fernandez, with whom Bergoglio has a prickly relationship.

According to Verbitsky’s book “The Silence,” Bergoglio withdrew his order’s protection of two Jesuit priests after they refused to quit visiting the slums, paving the way for their capture.

“I used to have the same opinion of him that most people have, of a humble, intelligent man dedicated to the poor … but then I discovered everything that is contained in my books, in my research,” he added.

Verbitsky’s accusations, based on the testimony of one of the two Jesuits who were kidnapped, are controversial, however.

Bergoglio, who led the Jesuit order in Argentina at the time, gave evidence at a major human rights trial that he asked junta leaders Jorge Rafael Videla and Emilio Massera to free the two priests, who were kidnapped and held for five months. And defenders of the new pope say he helped many dissidents flee.

“What Bergoglio tried to do was help where he could,” said Adolfo Perez Esquivel, who won the Nobel Peace Prize for defending human rights during the dictatorship

“It’s true that he didn’t do what very few bishops did in terms of defending the human rights cause, but it’s not right to accuse him of being an accomplice,” Perez Esquivel told Reuters. “Bergoglio never turned anyone in, neither was he an accomplice of the dictatorship.”

STRAIGHT TALKER

In more recent years, Bergoglio’s thinly veiled criticisms of those in power have been a constant of his leadership of Argentina’s Roman Catholics and his willingness to speak out has made him some enemies.

“He’s a real straight talker. He doesn’t beat around the bush, so to speak,” said Mercedes Zamuner, an assistant at a chapel where Bergoglio used to give Mass in Buenos Aires.

“When it’s been necessary, he’s said really tough things directed at certain quarters.”

At the height of a devastating economic crisis in 2001-02 that plunged millions into poverty, Bergoglio’s criticism of those in power was blunt.

Former President Eduardo Duhalde sat stony-faced as Bergoglio delivered an unusually harsh homily in 2002 as the crisis raged outside the cathedral gates.

“Let’s not tolerate the sad spectacle of those who no longer know how to lie and contradict themselves to hold onto their privileges, their rapaciousness, and their ill-earned wealth,” Bergoglio said in the televised sermon.

The former cardinal, the first Jesuit to become pope, was born into a large middle-class Buenos Aires family, his father an Italian immigrant railway worker and his mother a housewife.

People who know him say he shares two national passions – soccer and tango – and is endowed with the common touch, though he never worked in the ramshackle slums that encircle most of Argentina’s large cities.

“Bergoglio is willing to mingle with the people; he has washed the feet of AIDS sufferers, of pregnant women … he blessed the trash collectors,” Eduardo de la Serna, an Argentine priest who works with the poor, told Pagina 12 newspaper.

In the run-of-the-mill Flores neighborhood where Bergoglio grew up, his former home has been knocked down, but he is well-known among neighbors who remember him from childhood.

“When we were 12 he wrote me a letter saying that if he didn’t marry me, he’d become a priest,” said Amalia Damonte, 76, a childhood friend and neighbor who still lives there.

At a nearby Church school where Bergoglio attended nursery and had his first communion, he played football on Sundays, a 90-year-old nun recalled.

Bergoglio’s passion for the game has continued and he is a card-carrying member of leading Buenos Aires team San Lorenzo, who are nicknamed The Saints.

“He says he lives in a permanent state of suffering for San Lorenzo,” said fellow fan Oscar Lucchini, although he added that Bergoglio did not attend games.

Known for traveling by bus and shunning the luxuries of high Church office, Bergoglio lived in a one-room apartment next to the cathedral and is said to wear worn-out shoes.

“When he arrives in Rome he takes the bus from the airport,” said Francesca Ambrogetti, who co-authored a biography of Bergoglio that was published in 2010 after carrying out a series of interviews with him over three years.

“On one occasion, a driver from the Argentine Embassy in the Vatican asked Bergoglio if he’d please let him drive him because if he didn’t he’d get told off,” she said.

“He showed us his office once. It was incredibly luxurious (but) he turned it into a store room and received people in a really simple office instead.”

ROCKY RELATIONSHIP

Bergoglio has had a rocky relationship with Argentina’s left-leaning president, Cristina Fernandez, and her late husband and predecessor Nestor Kirchner.

In the midst of a chaotic uprising by farmers in 2008, the Church infuriated Fernandez’s government with a call for “a noble gesture and constructive dialogue.”

It was not the first time Bergoglio was accused of taking sides by the Kirchners, whose idiosyncratic blend of leftist rhetoric, unorthodox economic policy and the championing of human rights has kept them in power since 2003.

Kirchner avoided Bergoglio by shunning a traditional Mass in Buenos Aires cathedral to mark an important national anniversary and has often directed harsh words toward the clergy.

“God is for everyone. But the Devil reaches everyone too – those of us who wear trousers and those of us who wear cassocks,” Kirchner said in 2006.

Bergoglio once complained that Kirchner “sees me as the head of the opposition, and I’m not a politician,” according to 2007 comments by Joaquin Pina, bishop emeritus of Puerto Iguazu in northern Argentina.

Bergoglio’s relationship with Fernandez hit a fresh low when Congress passed a law in 2010 making Argentina the first Latin American country to approve gay marriage.

Fernandez offered her congratulations to Bergoglio during a speech on Wednesday and is expected to attend his inaugural Mass next week.

The Kirchners are not the only ones to have found themselves on the wrong end of Bergoglio’s unflinching approach.

In 2011, after a long economic boom, he took aim at Buenos Aires’ city government over the persistent exploitation of illegal immigrants in clandestine sweatshops.

“This city has failed and continues to fail in freeing us of this structural slavery,” he said.

Some think Bergoglio’s bold approach will prove an asset as he takes the reins of a troubled Church shaken by scandal.

An admirer of his predecessor Pope Benedict XVI, Bergoglio must overcome crises caused by child abuse by priests and the leak of secret papal documents that uncovered corruption and rivalry inside the Church.

“You get the sense of someone who has the capacity to defend what needs to be defended with great intensity,” his biographer Ambrogetti said.

CHILD ABUSE

Bergoglio became a priest at 32, nearly a decade after losing the use of one lung due to respiratory illness and quitting his chemistry studies. Despite his late start, he was leading the local Jesuit community within four years, holding the post of provincial of the Argentine Jesuits from 1973 to 1979.

He then held several academic posts and pursued further study in Germany. He was appointed auxiliary bishop of Buenos Aires in 1992 and archbishop in 1998.

A solemn man, deeply attached to centuries-old Roman Catholic traditions, he is not expected to stray far from Church doctrine on divisive matters of sexuality, divorce and abortion, but he is seen bringing a more pastoral touch.

“He has always stayed close to priests who got married. He even told us that he had married some (former) priests,” Ambrogetti said.

Bergoglio once branded priests who refuse to baptize children born outside marriage as “hypocrites.”

Argentina has not faced as many high-profile scandals of priests sexually abusing children, meaning Bergoglio has not been forced to take a public position on the issue like his peers in other countries.

“He mentioned that in cases of pedophile priests he considers it a perversion that predates ordination and that ‘you need to be very careful when choosing candidates for the priesthood,’” Ambrogetti said.

Almeida, from the Mothers of the Plaza de Mayo, urged Bergoglio to make his position on abuse cases clear now that he is in the Vatican.

“I really hope he now has the power in his hands to clarify and investigate these things,” she said, linking the sex abuse scandals to the Church’s role in the dirty war.

In Bergoglio’s former neighborhood in Buenos Aires, his childhood friend Damonte said she shared the high hopes of millions of Latin Americans celebrating the election of the region’s first pope.

“He is a good man, the son of a working-class family,” she said, standing on her flower-filled front porch. “I hope he can achieve all the good that he holds in his heart.”

(Additional reporting by Guido Nejamkis, Alejandro Lifschitz and Jorge Otaola; Editing by Kieran Murray and Claudia Parsons)

YPF, which was renationalized last year as Argentina battles
to reverse a long decline in natural gas and oil output, aims to
drill 132 oil wells at the Vaca Muerta shale formation in
Patagonia this year, part of a plan to fund development of the
project from cash flow.

YPF Chief Executive Miguel Galuccio said the company would
adjust the project’s pilot plan, which has an estimated
investment of $1.36 billion, if it was unable to secure the
equipment and staff it needs at the right price.

“How much of the plan we will carry out, whether we drill
80, 90 or 120 wells, I couldn’t say today,” Galuccio told
reporters after the company’s quarterly results.

“I wouldn’t rule out that 2013 is going to be a painful year
for us from the point of view of getting hold of equipment, from
the point of view of getting the people … but when you’re
growing it’s a pain that you willingly tolerate,” he said.

Vaca Muerta — which means dead cow in Spanish — has caught
the attention of international investors because it holds one of
the world’s biggest deposits of shale resources, with an
estimated 23 billion barrels of oil equivalent. YPF has
concessions on 40 percent of the site.

YPF earlier reported a fourth-quarter net of 1.019 billion
pesos ($207 million), up 91 percent on a year earlier and far
ahead of market expectations, buoyed by higher domestic crude
prices and a one-off gain related to the back payment of state
oil exploration incentives. Revenue rose 26.5 percent in the
final three months of the year.

YPF is trying to ink a partnership deal with Chevron Corp
to develop Vaca Muerta, but negotiations are moving
slowly due to a court freeze on the U.S. company’s assets in
Argentina over a pollution case in Ecuador.

Large amounts of capital will be needed to bring Vaca
Muerta’s energy riches into production and the country remains
virtually shut out of international debt markets a decade after
staging the biggest sovereign default in history.

Galuccio has said previously it will require private
investment of some $4.5 billion to finance part of the $32.6
billion needed to meet targets to boost production.

YPF aims to boost oil and natural gas production 32 percent
by the end of 2017, reversing years of declining output in the
energy-hungry country.

Despite the strong quarterly profit, YPF said its net profit
for the year fell 12.2 percent to 3.902 billion pesos ($793
million). It cited losses by companies in which it holds a stake
and the impact of new accounting regulations.

Galuccio said YPF planned to increase investment by 60
percent this year from 2012′s 16.49 billion pesos.

Costs should meet expectations as long as there are no more
pay negotiations, he said. Double-digit inflation is causing
company costs to soar in Latin America’s No. 3 economy.

President Cristina Fernandez seized control of YPF last May
by expropriating a 51 percent controlling stake from Spain’s
Repsol, which she accused of slacking on investment to
sustain production.

An industry source, who asked not to be named, and a
government source, who also asked for anonymity, told Reuters
that officials told farmers of the 2013/14 wheat export quota at
special meeting held on Wednesday night.

Argentina is a major world supplier of soy, corn and wheat
at a time when consumer nations are clamoring for South American
grains to compensate for disappointing harvests in breadbaskets
Russia, the United States and Australia.

The United Nations food agency warned last month that
adverse crop weather could cause violent price spikes this year
due to tight world grains stocks.

Benchmark Chicago wheat futures, however, were trading
this week at their lowest in almost nine months as heavy snows
in top exporter the United States eased dryness in key growing
areas and boosted production estimates.

Argentina restricts exports of wheat to ensure ample
domestic food supplies. The government also approved an
additional 1 million tonnes of 2012/13 wheat for export at the
meeting, bringing the current season’s total exportable surplus
to 3 million tonnes, the sources said.

The agriculture ministry estimates the recently completed
2012/13 wheat harvest at 10.1 million tonnes. The crop was
reduced by early season flooding and will be far under the 14.1
million collected in the 2011/12 season.

Internal wheat demand in Argentina is about 6 million
tonnes.

Growers say the curbs placed on international wheat sales
keep them guessing about how much wheat to plant and some have
shifted to alternative crops that can be exported freely like
soy and beer barley.

Wednesday’s announcement came earlier than in previous
years, which may help farmers plan for the upcoming season.

Wheat planting in Argentina starts in late May and ends in
August, with most seeds going into the ground in June and July.

Argentine soy farming has exploded in recent years as
growers seek to avoid export curbs that the government slaps on
corn and wheat. Barley output has shot to just under 5 million
tonnes from less than 800,000 tonnes in the 2005/06 crop year,
before the curbs went into effect.

President Cristina Fernandez has increased the government’s
role in Latin America’s third-biggest economy, often putting her
at odds with farmers who say her policies are chasing off
investment and keeping the country from meeting its full
agricultural potential at a time of rising world food demand.

“We don’t need an export quota, whether it be announced
early or late in the season,” said Santiago del Solar, who
manages farmland in the main agricultural province of Buenos
Aires. “In order for the wheat sector to prosper, we need to go
back to a free market.”

(Editing by Gary Hill, Steve Orlofsky, Lisa Shumaker and Ed
Davies)

The details of the accord, which also includes a $500
million loan by Bridas to YPF for future development of the
non-conventional fields, will be defined over the next 60 days.

“(Under the proposal) YPF would cede 50 percent of its
rights in the Bajada de Anelo and Bandurria fields, which cover
an area of 201 square kilometers and 462 square kilometers
respectively in the province of Neuquen,” the company said in a
filing with the Buenos Aires stock exchange.

YPF President Miguel Galuccio told reporters that similar
deals could be announced in the first half of next year, but he
declined to give details about any of the possible accords.

YPF signed a preliminary agreement for a pilot partnership
with U.S. oil major Chevron Corp on Dec. 19 that aims to
pave the way for major future investment in shale oil resources.

Bridas owner Carlos Bulgheroni, an Argentine oil mogul, told
Reuters earlier this month his company was considering making a
substantial investment in partnership with YPF. A day later, YPF
said it hoped to finalize the farm-in arrangement before the end
of the year.

“The two companies compliment each other,” Galuccio said.
“Together we can speed up operations in an area that has very
high potential, but where we need additional know-how and
investment.”

In 2010, YPF announced the discovery of the mammoth Vaca
Muerta (“Dead Cow”) formation in the southern province of
Neuquen, which contains an estimated 23 billion barrels of oil
equivalent.

YPF says it needs to invest over $30
billion in the next five years, $4.5 billion of which is to come
from strategic partners, to help pay to develop Argentina’s
shale oil and gas resources.