Royal Dutch Shell and Argentina's state-owned company YPF came to a deal regarding the development of the oil and gas assets in Vaca Muerta shale field (Patagonia). The Argentinian government bets on the development of Vaca Muerta resources, estimated at 16.2 Gbl of shale oil and 308 Tcf (nearly 8,700 bcm) of gas to reverse the energy shortage in the country.
Shell has agreed to invest US$300m in the project and in particular in the Bajada de Añelo field in which it has a 50% stake. The investment will be done in two phases and will be examinated by local authorities.
This agreement is the sequel of what happened previously in January 2017 when the Argentina government signed an agreement with YPF, Chevron, Total, Shell, BP's unit Pan American Energy and with labour unions, as part of a plan to attract several investors in the Vaca Muerta project. Under the terms of the agreement, gas produced at new Vaca Muerta wells will benefit from a subsidised price of US$7.5/MBtu (around twice the front-month natural gas futures on the NYMEX) through 2020, to lure long-term investors.
Consequently, YPF has raised its investment forecast by 20-30% to US$2.3bn in 2017. So far, Chevron and ExxonMobil have expressed interest in the Vaca Muerta formation, which remains largely unexplored. Only two of the 19 concessions awarded in the area have started producing.