Argentina’s state-run energy company YPF signed a memorandum of understanding on Tuesday with the local unit of Dow Chemical Co, a first step toward possibly creating a joint venture to develop shale gas on the “El Orejano” block within the vast Vaca Muerta shale formation.
The agreement will allow the two sides to negotiate the terms and final conditions of a deal in which YPF would cede a 50 percent stake to Dow to jointly develop the area, sized at 41 square kilometers (10,131 acres).
Argentina signed a similar agreement with Chevron Corp in December, but negotiations are moving slowly due to a court freeze on the U.S. company’s assets in Argentina over a pollution case in Ecuador.
Vaca Muerta - located in southern Argentina - has caught the attention of international investors because it holds one of the world’s biggest deposits of shale resources, with an estimated 23 billion barrels of oil equivalent. YPF has concessions on 40 percent of the site.
Argentina’s government seized control of YPF from Spain’s Repsol last year, saying that company had not invested enough to sustain oil and natural gas production. YPF is now trying to raise $4.5 billion in private capital to finance an estimated $32.6 billion in investments over the next five years.