State energy company YPF has signed a preliminary agreement with Bridas Corp. for the development of Argentina's vast nonconventional oil and gas resources, YPF said Friday.
The company said it will require an initial investment of $1.5 billion over two years for the development of 663 square kilometers (256 square miles) of the Vaca Muerta ("Dead Cow") formation discovered in Neuquen province in 2010.
YPF will hand over 50 percent of its rights to Bridas for the Bandurria and the Bajada de Anelo fields and both energy companies will share exploration and exploitation costs as well as technology and know-how.
Most of the development will involve shale, but YPF said there are also plans for the exploitation of "wet gas," or natural gas rich in associated liquids, at Bajada de Anelo.
The pilot project includes the drilling of 130 wells. Bridas, an Argentine company half owned by China National Offshore Oil Corp., will also lend $500 million to YPF for the development of the shale fields.
The deal comes a little over a week since YPF signed a partnership deal with Chevron Corp. for development of shale resources.
Both accords are essential to YPF's efforts to develop what experts believe are the world's third-largest shale resources and boost the company's production, which dropped when it was controlled by Spain's Grupo Repsol.
Argentina expropriated a majority stake in YPF from Repsol in April after accusing it of bleeding YPF dry and forcing Argentina to import record amounts of energy by failing to invest in its Argentine operations.
The Argentine economy, South America's second largest after Brazil, needs billions of dollars to exploit its energy reserves, and until recently major oil companies had failed to commit. Analysts blamed the government's heavy hand in the market and Repsol's threat to sue any partner for the $10 billion investment that Argentina seized when it took over YPF.
Repsol has sued Chevron in New York seeking to prevent the U.S. oil giant from developing energy assets in Argentina. Chevron says there's no legal basis for the lawsuit.