"Imagine you find yourself overnight with 10 drilling towers in the yard of your house and you see them throwing polluted water on either side and breaking everything"
By Juliana Castilla
BUENOS AIRES, Sept 8 (Reuters) - Indigenous Mapuche communities demanding cash payments and blocking oil wells in Argentina's Vaca Muerta area are threatening the long delayed development of the world's second-largest shale fields, oil companies say.
Since the beginning of the year the Mapuche have cut off access to 14 wells in the Loma de la Lata field, one of only two shale fields currently producing in the Belgium-sized Vaca Muerta area, state-run YPF said in an e-mailed statement.
YPF, Argentina's largest oil company, spent 55 million pesos ($3 million) on payments to a Kaxipayiñ Mapuche community leader last year, more than double the payments in 2014, a company source said.
The conflict is intensifying as President Mauricio Macri prioritizes attracting energy investment to develop the area and end Argentina's reliance on imported energy.
"It affects us a lot," YPF Chairman Miguel Gutierrez said of the Mapuche conflict in a recent interview. "It's a situation that has been developing for many years and now it must be resolved."
A private oil company source who was not authorized to speak on the record said Mapuche communities are eyeing a greater share of the expected boom in the form of cash payments.
Companies including Exxon Mobil Corp, France's Total SA, BP PLC unit Pan American Energy LLC and Royal Dutch Shell PLC have announced investments in Vaca Muerta in recent months.
Part of Loma de la Lata field is on government-recognized Mapuche territory. Argentine law gives companies the right to extract natural resources found beneath private property, and the state compensates the owner for use of the land.
Kaxipayiñ Mapuche leader Gabriel Cherqui says his people are not opposed to drilling and only want YPF to clean up pollution.
"Imagine you find yourself overnight with 10 drilling towers in the yard of your house and you see them throwing polluted water on either side and breaking everything," he said in an interview, adding that members of his community have cancer and seen the number of abortions rise.
YPF denies polluting, though it admits there is contamination in the area from oil operations some 25 years ago. In a statement YPF said the Kaxipayiñ community has blocked cleanup efforts "and pursues interests that have nothing to do with the environment."
The private company source said the Mapuche also demand companies hire certain private contractors that charge more than the market rate. Cherqui could not be reached to respond to that point.
The Argentine government's relationship with the broader Mapuche community has grown tense in recent weeks as human rights groups accuse federal security forces in the disappearance of a man from a Mapuche rights protest in the Patagonian province of Chubut. He has not been seen for over a month, spurring nationwide protests. The government says it is investigating.
YPF's Gutierrez said companies had called on the provincial government of Neuquen, where Loma de la Lata is located, to mediate a solution. Companies had previously negotiated access to wells directly with the Mapuche. The Neuquen government did not respond the request for comment.
"What we have to achieve is a protocol to follow and all the parties know: the Mapuches, the industry and regulatory authorities," he said.
"We are starting a ramping up of development in Vaca Muerta. There is a great opportunity and we have to standardize this type of dialogue."
(Writing by Caroline Stauffer; Editing by Marguerita Choy)
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