MercoPress. South Atlantic News Agency

YPF and US based DOW sign memorandum to develop shale gas in Patagonia

CEO Galuccio and La Roza from Dow sign the agreement

Argentina’s nationalized energy company YPF on Tuesday signed a memorandum of understanding with the local subsidiary of the US Dow Chemical to develop the shale gas deposits in the southern Nequen province.

The Neuquen basin, located at the northern end of Patagonia, is thought to hold some of the world's richest oil and shale gas reserves. It includes the 30,000 square kilometer Vaca Muerta (Dead Cow) shale reserve.

The agreement states that both companies will negotiate terms and conditions for a joint venture in which YPF will give Dow Chemical a 50% stake in developing the 42 square kilometer El Orejano bloc.

The memorandum was signed by YPF CEO Miguel Galuccio and his peer from Dow South Latinamerica Regional Office Jorge La Roza.

“This agreement strengthens Dow's competitive position, consolidates our relationship with YPF, and reflects our commitment and contribution to the economic and industrial development of Argentina,” said CEO La Roza.

YPF put into production early this month its first unconventional hydrocarbon well in Vaca Muerta, the statement added.

“Unconventional” refers to oil and gas deposits like oil shale, where the hydrocarbons are tapped not by conventional wells but instead must be released by methods like fracking, designed to free the reserves by fracturing the source rock.

“We have found in Dow a partner of great importance that from the very beginning of discussion has shown maximum interest and a strong decision to get involved as direct players in the transformation that Argentina is implementing with the exploitation of non conventional resources”, said CEO Galcuccio.

The development of the shale gas reserves in Argentina will supply Dow with a secure and steady provision of crucial minerals and hydrocarbons and at the same time ensure its solid position in Argentina and grow in Mercosur.

Argentina seized YPF from Repsol in 2012, accusing the Spanish oil giant of allowing oil and gas production to lapse and forcing Argentina's oil import bill to rise.

The Vaca Muerta reserve places Argentina third, behind the United States and China, among 32 countries listed in a US Energy Department study of unconventional hydrocarbon resources.