YPF, American Energy Partners sign deals on shale gas

By Staff Writer

Jan 15, 2016 05:56 PM EST

Argentina state-run energy company YPF has forged an alliance with American Energy Partners on developing the shale resources in the South American country. The deal assumes significance amid lower oil prices impacting the viability of energy projects. The new project is expected to enhance business climate in Argentina. The first phase of the project is scheduled for completion in mid 2018.

Aubrey McClendon, Chief Executive, American Energy Partners, is planning to mobilize money to fund its 50 percent stake in the pilot project with YPF. McClendon seeks to raise funds in next two months. The Argentina state-run company will invest $500 million in next three years. The latest deal underscores interest in Argentina's reserves of shale gas and oil sector. The Argentina government is extending support in form of subsidies in the energy sector.

Financial Times reports that the capital raising by US shale companies declined during the past one year owing to continuous drop in oil prices. If the shale gas project gets the required funds, then it would be a major breakthrough for the Argentina. The shale formation in Vaca Muerta located in Patagonian of Neuquen is expected to make Argentina a major shale producer in the world.

McClendon is known for his early role in the the US shale industry. "We intend to bring US-style shale drilling and operating expertise, completion techniques and cost structure to Vaca Muerta." McClendon has described the Vaca Muerta shale formation in Patagonia as a world class unconventional play with tremendous potential.

American Energy Partners has three months time to ensure sufficient funds for the project with YPF. Once the funds mobilization is completed, then both the companies will meet again to reaffirms the deal, as reported by The Wall street Journal (WSJ). McClendon may tap private-equity (PE) firms for fund raising for the project. 

Argentina wants to attract investments in developing energy resources. The government is offering subsidies for new projects in the energy sector. The subsidies leave the domestic oil prices twice the global prices. The domestic gas prices are three-fold higher than global prices. Argentina will continue subsidies until the global prices recover.

Aubrey McClendon and Miguel Galuccio, President and CEO of YPF, have signed initial agreement. Initially, both the companies will take off a pilot project in Bajada de Añelo block that spans over 200 kilometers. The first phase of the project is scheduled for completion in mid 2018, according to World Oil. After the first stage, the project will enter the US-style shale manufacturing mode.

Miguel Galuccio is optimistic that the partnership with American Energy Partners will help his company speed up the learning curve in exploring the untapped shale reserves in the country. YPF has partnership deals with global energy majors such as US' Chevron and Malaysia's Petronas. 

YPF along with its partners has invested $3 billion in exploration and development of unconventional oil and gas in Vaca Muerta. YPF and subsidiary of Dow Chemical are investing $500 million in a joint venture project in Argentina. 

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