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Spanish oil company Repsol has filed a U.S. lawsuit to block Chevron’s partnership with YPF.Natacha Pisarenko/The Associated Press

Argentine energy company YPF signed a partnership deal with U.S. oil major Chevron Corp. on Wednesday that aims to pave the way for major investment in the South American country's vast shale oil resources.

YPF's chief executive, Miguel Galuccio, said earlier this month he expected his company to finalize a joint-venture agreement with Chevron – Argentina's fourth-largest oil producer – before the end of the year.

Mr. Galuccio and Ali Moshiri, Chevron's head of operations for Latin America and Africa, said Wednesday's letter of intent established a pilot program to drill 100 non-conventional oil wells at a cost of about $1-billion (U.S.).

Details of a deal for YPF to transfer a 50-per-cent interest in the Loma de la Lata Norte and Loma Campana fields, which cover an area of nearly 300 square kilometres, will be negotiated over the next four months.

"The question is going to be how big the investment will be beyond the pilot," Mr. Moshiri told reporters in Buenos Aires via video conference. "Our goal is to start as soon as possible. What we need is to push our teams to put a definitive agreement together as soon as possible."

Mr. Galuccio, who was appointed soon after President Cristina Fernandez nationalized YPF in May, called the preliminary accord "a very important day for YPF."

YPF has said that to boost output it needs to invest more than $30-billion in the next five years, $4.5-billion of which is to come from strategic partners.

The pilot drilling program should be completed over the next year and both companies will help fund the cost, although they declined to say whether it would be split equally.

Argentina sits on huge resources of shale natural gas and oil, but large amounts of capital would be needed to bring them into production. The country remains virtually shut out of global credit markets a decade after staging the biggest sovereign debt default in history.

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

Mr. Galuccio said fully developing the two Vaca Muerta areas where the pilot project is based would require an investment of up to $15-billion and the drilling of as many as 2,000 wells.

Before Ms. Fernandez seized control of YPF, she accused former parent Repsol YPF SA of under-investing at a time of growing Argentine energy demand.

After Argentina seized control of Repsol's majority stake in YPF, the Spanish oil company threatened to file legal action against any company that partnered with the Argentine company.

Making good on its threat, Repsol filed a U.S. lawsuit to block Chevron's partnership with YPF, adding to Chevron's legal challenges in Argentina.

In a separate case, a judge ordered an embargo on up to $19-billion worth of Chevron's assets in Argentina last month in connection with an environmental lawsuit by Ecuadorean villagers.