Argentine President Cristina Fernandez and Venezuelan counterpart Hugo Chavez signed an agreement here forming a "strategic alliance" between their respective state oil companies, YPF and PDVSA.

Under the accord, the two firms will increase cooperation in all areas, a partnership Chavez said "is possible thanks to the fact Argentina recovered its sovereignty in the oil sphere," alluding to the Argentine government's having seized a controlling stake in YPF earlier this year from Spain's Repsol.

During the signing ceremony Tuesday at the Argentine Embassy in Brazil, Chavez recalled that he once suggested to Fernandez's late husband and predecessor, Nestor Kirchner, that "he recover that industry" and that the latter said he would do so "at the right time."

"We celebrated in Caracas when we learned about the (expropriation)," Chavez said, adding that the agreement will give YPF a presence in Venezuela's massive Orinoco heavy-oil and tar belt - considered the world's largest single hydrocarbon accumulation - while PDVSA "will continue its presence in Argentina."

A joint statement released after the ceremony said the parties decided "to identify strategic participation schemes for joint planning across the hydrocarbon value chain, both in Venezuela and Argentina."

The accord also covers the incorporation of PDVSA in projects to develop crude and gas deposits in Argentina, where huge shale oil and gas resources have been discovered recently.

YPF and PDVSA will form a work group to implement the alliance, with the first meeting to be held within 30 days in an unspecified location.

Fernandez, for her part, hailed the "recovery of YPF" as a "historic moment" and she underscored the "great potential generated" by Venezuela's formal inclusion Tuesday as a full member of the Mercosur trading bloc, also made up of Argentina, Brazil and Uruguay.

Paraguay is a founding member of Mercosur, but its membership was suspended following the ouster of President Fernando Lugo in June.

"We have a lot of what the world needs most right now: energy and food," Fernandez said. EFE