Argentina’s state-run oil firm YPF, France’s Total, Wintershall Energía and BP’s Pan American Energy have announced a $1.15 billion joint investment to increase shale gas production.
The investment is the largest specific project announcement since March in Vaca Muerta, one of the world’s largest shale formations, as Argentine President Mauricio Macri’s government tries to reduce reliance on gas imports that have strained Argentina’s finances.
The provincial government in Neuquen, where Vaca Muerta is located, has agreed to split the Aguada Pichana area into two parts and is also combining it with the Aguada de Castro area, according to a statement.
Total will operate the eastern part of Aguada Pichana with a 41% stake, where 48 horizontal wells will be drilled through 2021, up from 12 currently. Pan American Energy will operate the western part as well as Aguada de Castro with a 45% stake and plans to drill 24 horizontal wells.
The investments will double natural gas production in the area to 4.5 million cubic meters per day, up from 2.2 million cubic meters per day currently, Neuquen Governor Omar Gutierrez said at a news conference.
Pan American Energy Executive Director Marcos Bulgheroni said lower logistics costs were still needed but added that “the development of Vaca Muerta is on a path of no return.”
The partners had already invested $500 million in the area between 2014 and 2016.
In March, Argentina’s Tecpetrol, part of the Techint Group, said it would invest $2.3 billion in the Vaca Muerta shale fields through 2019, marking the biggest announcement related to the formation in years.
That investment came after the government said it would gradually lower the price it guarantees for gas drilled from new wells, currently $7.50 per million British thermal units of gas, to encourage investment sooner rather than later.
Vaca Muerta contains 308 trillion cubic feet of shale gas and 16.2 billion barrels of shale oil, according to the U.S. Energy Information Administration.