Argentina’s state-run oil company YPF SA said it reached a preliminary deal with Royal Dutch Shell Plc (NYSE: RDS-A) on Feb. 23 to develop oil and gas assets in the Vaca Muerta shale field, involving a $300 million investment from Shell.
Both companies will take a 50% stake in the Bajada de Añelo Field to develop a pilot program, which will be operated by Shell, YPF said in a statement. The agreement is subject to approval by provincial authorities, and Shell’s investment will come in two phases, YPF said.
Shell spokeswoman Kimberly Windon confirmed the agreement, adding that the definite terms would be agreed within 60 days and that the project would continue as a full-field development if the pilot is successful.
The deal comes after President Mauricio Macri reached an agreement with oil companies and unions last month to stimulate investment in Vaca Muerta, which his government hopes can narrow Argentina’s energy deficit and reduce costly gas imports.
The unconventional formation in Patagonia, at roughly 30,000 sq km (11,583 sq miles), is roughly the size of Belgium and is one of the largest shale reserves in the world.
Under the January agreement, Argentina guaranteed a subsidized natural gas price for production from new wells of $7.50 per million British thermal units through 2020, while labor unions signed on to more flexible contracts.
YPF and Shell, along with oil majors Chevron Corp., Total SA and BP unit Pan American Energy LLC , agreed to invest a total of $5 billion to tap the formation in 2017 and double that in coming years, Macri said.
YPF said it would invest $2.3 billion in Vaca Muerta this year, while the other companies did not announce specific investments.
Last year, Shell said it planned to invest $300 million per year through 2020 in Argentina in exploration, refining, distribution and marketing. Bajada de Añelo totals some 204 sq km(78.76 sq miles) and has both shale oil and shale gas resources, YPF said.
Recommended Reading
Brett: Oil M&A Outlook is Strong, Even With Bifurcation in Valuations
2024-04-18 - Valuations across major basins are experiencing a very divergent bifurcation as value rushes back toward high-quality undeveloped properties.
Marketed: BKV Chelsea 214 Well Package in Marcellus Shale
2024-04-18 - BKV Chelsea has retained EnergyNet for the sale of a 214 non-operated well package in Bradford, Lycoming, Sullivan, Susquehanna, Tioga and Wyoming counties, Pennsylvania.
Defeating the ‘Four Horseman’ of Flow Assurance
2024-04-18 - Service companies combine processes and techniques to mitigate the impact of paraffin, asphaltenes, hydrates and scale on production — and keep the cash flowing.
Santos’ Pikka Phase 1 in Alaska to Deliver First Oil by 2026
2024-04-18 - Australia's Santos expects first oil to flow from the 80,000 bbl/d Pikka Phase 1 project in Alaska by 2026, diversifying Santos' portfolio and reducing geographic concentration risk.
Ozark Gas Transmission’s Pipeline Supply Access Project in Service
2024-04-18 - Black Bear Transmission’s subsidiary Ozark Gas Transmission placed its supply access project in service on April 8, providing increased gas supply reliability for Ozark shippers.