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YPF, Pampa, Petrobras team up on Argentina tight gas project

Argentina's YPF will buy stakes in two blocks with "high potential" for unconventional natural gas production, entering into a partnership that plans to drill 30 wells over the next three years, the company said Friday.

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State-run energy company YPF said it would acquire the stakes for $140 million from Pampa Energia, the country's biggest electric utility, which on Thursday finalized a $892 million acquisition of most of the assets of Brazil's state-run Petrobras in Argentina.

According to the terms of the deal, YPF would get a 33.33% stake in the Rio Neuquen block in the southwestern provinces of Neuquen and Rio Negro, and an 80% stake in Aguada de la Arena in Neuquen. Both blocks are in the Neuquen Basin, the biggest source of conventional gas production in Argentina -- and home to the giant Vaca Muerta shale play.

YPF said it would become the operator of the blocks, which it said have strong potential for finds in shale and tight plays, according to in a filing with the Buenos Aires Stock Exchange.

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YPF estimates that the acquisition will gain it 3 million cu m/d of gas production -- and access to "great potential for the development of gas in the Mulichinco, Lajas, Punta Rosada and Vaca Muerta formations," according to the statement.

Separately, Pampa said it would retain a 33.4% stake in Rio Neuquen and 20% in Aguada de la Arena, while Petrobras would join the consortium to develop Rio Neuquen with a 33.6% stake in that block. Petrobras agreed to pay $72 million for that stake, Pampa said.

Once the deal is approved, the three companies plan to invest $450 million to drill 30 wells on Rio Neuquen with a goal of doubling production there to 5 million cu m/d in three years, a Pampa spokesman said.

"Everybody is saying that there is huge potential for tight gas in Rio Neuquen," the spokesman said on the condition of not being named. "That will be the focus of the investment."

Argentina's new right-of-center government of President Mauricio Macri has been seeking to promote gas drilling to arrest a widening deficit, now at about 30% of consumption after a 16% decline in production to 120 million cu m/d from a record 143 million cu m/d in 2004.

Macri's administration has raised gas prices at the wellhead to an average of $5.20/MMBtu from less than $3.00/MMBtu previously, while also offering incentives of up to $7.50/MMBtu for new developments in unconventional plays.

--Charles Newbery, newsdesk@platts.com
--Edited by Derek Sands, derek.sands@spglobal.com