By TAOS TURNER
BUENOS AIRES -- Argentina's state-run oil company YPF has signed a preliminary agreement to form a joint venture with Dow Argentina, the local unit of Dow Chemical, to explore for shale gas.
The companies now enter into talks on how to work out the final details of a deal to uncover unconventional gas in the so-called Orejano block in Argentina's resource-rich Neuquen province.
Neither company said how much it plans to invest in the project.
"The agreement between both companies is fundamental for the development of shale gas in the country...," YPF said in a statement late Tuesday.
Dow Argentina and YPF also agreed to work together to come up with ways for further develop the petrochemical industry in Argentina. Argentina ranks third in the world, behind China and the US, in potentially recoverable shale-gas reserves, with 774 trillion cubic feet, according to a study by the US Energy Information Administration. Argentina also has large quantities of shale oil.
Argentina stopped exporting gas in 2004 to ensure it had enough gas to meet domestic demand that was rising alongside its then booming economy.
But demand for gas grew at a faster pace than production, turning the country into a net importer and requiring the government to spend billions a year on imported energy. YPF is attempting to reverse this trend and put Argentina on a path to energy independence by investing in exploration and production and getting other local and foreign companies to do the same.
Dow Jones Newswires