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YPF and Petronas kick off shale campaign

The companies have started drilling at their joint pilot project in the Vaca Muerta shale

Argentina's YPF and Petronas recently started drilling their first well at a $550m joint venture pilot project in the Vaca Muerta shale in southern Argentina, Miguel Galuccio, the head of YPF, told delegates to AOGC 2015 on Monday.

The companies finalised a deal in December to start a pilot shale development project at the Amarga Chica Block in the Vaca Muerta shale, marking Petronas’ first foray into Argentine shale. Galuccio said the companies would drill 35 wells during the test phase of the campaign. Under the terms of the deal, Petronas will cover $475m of the pilot phase’s $550m costs.

YPF is sitting on billions of barrels of shale oil and gas in the Vaca Muerta, but it needs foreign partners to help it cover the costs of developing the shale play. In addition to the deal with Petronas, YPF has signed deals with Chevron and Dow.

But the company will need many more such deals, and Galucccio has spent a lot of time in Asia since taking over the top job at YPF in 2012 trying to drum up investment. 

“Just to develop Vaca Muerta, Argentina will require around $200bn of investment,” Galuccio said. “Clearly we will have to do it with partners because there is no company in Argentina that has enough cash and the government of Argentina doesn’t have enough money. So we require people that are keen to come help us develop the resource.“ It is a tough sell, though, for Galuccio. Argentina has long had a reputation as a difficult place to do business and the nationalisation of YPF from Repsol in 2012 only did further damage to the country’s image. 

Galuccio acknowledged the country’s image problem. But he also pointed to progress at Vaca Muerta. Production and investment is on the rise and costs are coming down, he said. Moreover, a deal with the government to keep the domestic oil price higher than the international price has meant the downturn hasn’t hit as hard in Argentina, Galuccio said.  

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