Chevron Corp. is taking a huge risk by signing a production contract with YPF, which is owned by the Argentina Government, analysts said. The US $1.24 billion deal involves the development of Vaca Muerta gas and oil field.

Although economists observed that the transaction could prove to be the turning point for Argentina's extremely protectionist policy, it carries an underlying political danger.

When the mid-term elections come in October, Chevron's investment could backfire if President Cristina Fernandez loses control of Congress. The opposition is already using the issue to accuse her of selling the country's wealth to the US-based Chevron.

Chevron and YPF signed the agreement on July 16 to develop Vaca Muerta, considered as one of the biggest untapped reserves in the country. Interestingly, Fernandez' administration issued an order a day before the deal was signed that oil titans may enjoy a 20% tax holiday of the oil and natural gas they ship out of Argentina.