Argentine’s YPF and Gazprom move closer to a joint venture

Argentine flags on Plaza de Mayo
Source: DollarPhotoClub

On Friday, Argentina’s state-controlled oil and gas company YPF signed a cooperation agreement with Russia’s state-owned giant Gazprom to jointly explore Argentine’s unconventional resources.

With estimated reserves at 27 billion barrels of oil and 802 trillion cubic feet of gas, Argentina is the second-richest country in the world it terms of shale gas and fourth-richest in terms of oil but tapping these reserves has proved difficult. According to a report issued in July by The Argentine Institute of Petroleum and Gas (IAPG) exploration of the Vaca Muerta shale deposits will cost more than US$1 billion over the next 20 years.

This is why the deal signed between YPF’s Miguel Galuccio and Gazprom’s Alexei Miller in the Russian city of Vladivostok may prove crucial. Although no specific details have been released, the agreement signed on Friday calls for the companies to work out the details of at least one joint project by March 1, 2016.

The agreement builds on a previous memorandum of cooperation that was signed between the two parties in Moscow in April this year in the presence of Russia’s Vladimir Putin and Cristina Fernandez de Kirchner, president of the Republic of Argentina. The spring agreement stipulated the main areas of the future bilateral cooperation, including exploration, production and transmission of hydrocarbons in Argentina and third countries.

“Today’s signing is a milestone for YPF on its path to making our resources valuable to world class partners,” Mr. Galuccio said of the Friday agreement. “Gazprom can bring to YPF its know-how and its financial strength as the biggest player in gas on the planet.”

Argentina has already moved to the forefront of the shale race, as one of the few countries in the world producing commercial quantities of shale gas. This is partly down to existing partnerships between YPF and Chevron, Dow Chemical, Sinopec, and Malaysian oil company Petronas.

Argentinian oil and gas industry needs the know-how and the investment that foreign companies can bring. It also is in dire need of pipelines to transport the gas from the well-head to the point of use. According to the IAPG report, the country needs between 4,300 and 8,000 kilometres of pipelines, with more than 40 percent of the current pipelines and about 17 percent of the compression plants are more than 40 years old.

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