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Shell joins shale hunt in Argentina

15 Dec 2011, 11.00 pm GMT

Buenos Aires, 15 December (Argus) — Shell signed an agreement this week to probe shale-prone acreage in Argentina's Neuquen province, the latest oil major to increase its presence there.

Shell joined Argentinian independent Medanito in an agreement with provincial oil company Gas y Petróleo de Neuquén to explore the potential for oil and gas shale resources. The accord foresees a five-year investment plan that could reach $200mn and culminates almost a year of negotiations between Medanito and Shell's exploration unit O&G Developments.

The companies will explore Neuquén's Águila Mora and Sierras Blancas areas. Shell operates the venture with a 65pc stake. Medanito holds 25pc, while Gas y Petróleo de Neuquén holds the remaining 10pc.

Medanito won a tender for the rights to explore Sierras Blancas in 2006 and Águila Mora in 2009. Exploration in both areas began in earnest three years ago.

“Medanito has detected unconventional hydrocarbons in the area but since we don't have expertise in (shale exploration) we join forces with other companies,” Medanito's director of corporate affairs Andrés Carosio said. He added that Medanito hopes to learn from Shell's experience with unconventional drilling in the US.

Shell and provincial authorities declined to comment. Under provincial law, Governor Jorge Sapag still has to ratify the agreement.

The drilling is not expected to begin until after the third quarter of 2012, Carosio said, noting that, among other issues, the companies still have to import special equipment from abroad, probably the US.

Both oil fields are in the centre of Neuquén province. Sierras Blancas, located around 150km from the provincial capital, is on the border of Loma La Nata, where Spain's Repsol-YPF recently announced the discovery of 927mn bl of oil equivalent of “technically recoverable” unconventional resources.

Águila Mora is around 100km to the west in a region that Medanito believes is “the heart of the shale oil structure in the Neuquén Basin,” Carosio said.

Medanito has concessions or joint ventures in 13 areas in the provinces of Neuquén and Rio Negro. It joined forces with Gas y Petróleo de Neuquén to explore for shale resources in the Aguada del Chivato and Aguada Bocarey fields earlier this year, and drilling is expected to begin within 10 days.

Earlier this month, Chevron secured a 20-year extension over the Trapial-Curamched field in Neuquén until 2032. Among other companies active in the area are US independent Apache, ExxonMobil and Canadian independent Americas Petrogas.

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