Shell, YPF to develop Vaca Muerta gas pilot project

Royal Dutch Shell PLC and Argentina’s YPF SA have signed preliminary terms and conditions of an agreement to develop a shale gas pilot project in the Vaca Muerta shale of Neuquen province.

Royal Dutch Shell PLC and Argentina’s YPF SA have signed preliminary terms and conditions of an agreement to develop a shale gas pilot project in the Vaca Muerta shale of Neuquen province.

The agreement would provide each company 50% working interest with Shell as operator in the 55,000-acre Bajada de Anelo northeast of Loma Campana, a strategic region in Vaca Muerta that has both shale oil and shale gas resources, according to a release from YPF.

Shell estimates the project would require investment of $300 million, which would occur in two phases.

YPF Chairman Miguel Angel Gutierrez noted the importance of a new partner in Vaca Muerta “after the addendum to the collective bargaining agreement” that was recently sealed among stakeholders in the Neuquen basin.

The Argentine government last month struck a deal with labor unions and international oil firms—including Shell, Chevron Corp., BP PLC, and Total SA—to attract investment to Vaca Muerta.

As part of the deal, the government will provide a subsidized wellhead price of $7.50/MMbtu through 2020 and invest in infrastructure surrounding oil and gas operations. In turn, the firms pledged to invest $5 billion in 2017, with that total multiplying in subsequent years.

Shell’s presence in Argentina includes its 22.5% nonoperated interest, held since 1998, in the Acambuco natural gas and condensate block in Salta province. That concession is operated by Pan American Energy LLC.

In 2012, Shell became operator with 90% interest in the unconventional Sierras Blancas, Aguila Mora, and Cruz de Lorena blocks in Neuquen. It also has 45% nonoperated interest in the province’s La Escalonada and La Ceniza Corner blocks.

The US Energy Information Administration estimates Vaca Muerta holds 308 tcf of dry, wet, and associated shale gas resources.

More in Drilling & Production