YPF and Dow to jointly invest $500m in Argentine shale development

Argentinian flag
Source: DollarPhotoClub

Argentina’s state-run energy company YPF and an Argentine unit of Dow Chemical has signed a JV to put additional investment of $500m into the exploitation program at the El Orejano gas field, which is a part of the Vaca Muerta shale formation in the southern province of Neuquen. Dow and YPF have already invested $350m in the El Orejano project, which was launched in 2013.

The JV intends to triple gas production from the project, which is currently producing more than 750,000 cubic meters per day of gas from 19 wells, increasing it to 2 million cubic meters a day by the end of 2016. To fully develop the 45km2 (17.4mi2) block, investment could eventually reach $2.5bn to drill more than 180 wells and set up associated infrastructure, YPF said.

Gaston Remy and Miguel Galuccio – the CEOs of Dow Argentina and YPF – met with Argentina’s newly elected president Mauricio Macri, who welcomed the expected investment saying that he hoped this will be one of many more private sector announcements to boost investment in Argentina.

President Macri highlighted the importance of “joint efforts between an Argentine firm such as YPF and a multinational as respected as Dow,” and emphasized that gas production aid job creation and economic development in Argentina.

“We should be optimistic about the future,” Mr. Macri said, “even though we have a complicated present.”

“Vaca Muerta is a great opportunity for Dow because it allows us to have access to gas that is the main raw material in the petrochemical industry,” Dow Argentina chief executive Gaston Remy commented on the joint venture.

“We are seeing extraordinary results and it encourages us that a leader in the petrochemical industry trusts YPF for its first upstream development,” YPF chief executive Miguel Galuccio said.

Argentina and China are currently the only countries outside of North America that are producing shale gas and tight oil at commercial volumes – according to an EIA report released in June. With 802 trillion cubic feet of shale gas and 27 billion barrels of shale oil, Argentina is the second richest shale gas and fourth richest shale oil country in the world.

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