State-run Argentine oil company YPF SA said Thursday it has reached a deal with Malaysia's Petronas to develop what is believed to be massive deposits of shale oil and gas in the vast Vaca Muerta formation in Patagonia.
YPF said the Malaysian state-owned oil company will provide $475 million of an initial investment totaling $550 million for a pilot phase scheduled to start early next year.
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In the pilot phase, the partners plan to drill more than 30 horizontal and vertical wells using hydraulic fracturing in a section of Vaca Muerta known as the Amarga Chica Block.
The investment is expected to exceed $1 billion in the following stages over the next five years, YPF said.
Vaca Muerta, in the remote eastern province of Neuquen, is believed to be among the world's largest deposits of shale oil and gas.
U.S.-based Chevron Corp. previously signed a $1 billion deal to produce oil and gas in Vaca Muerta.
The announcement of the Petronas investment comes amid a recession in Argentina as well as economic uncertainty stemming from a legal dispute with U.S. investors that forced the South American country to default on payments to bond holders last month.