Argentina's YPF efforts to tackle the exploration and exploitation of recoverable shale resources is facing an uphill battle in spite of its success in placing bonds in the local market. Argentina's business environment has turned increasingly negative last year with restrictions in foreign exchange transactions, imports and transfer of dividends. Nevertheless YPF has been successful in attracting private international and national oil companies looking to be the first in tapping shale resources in Vaca Muerta. But the country needs to obtain large investments, and international financing by placing bonds in the market will not be available pending a final resolution of the bondholders hold outs.

The option that could provide Argentina with the needed advantage is the appetite for risk that oil and gas companies have despite economic and political uncertainties. The negotiation with Uruguayan Ancap in early 2013, the deal signed between Chevron and YPF in late 2012, and the one of Pan American Energy (owned by Argentina's Bridas Corporation and China's CNOOC on a 50% basis) signal a trend that may continue in 2013. The most recent announcement of the MOU signed between YPF and DOW for the joint exploration of the area El Orejano (see note below) seems to support this trend.

Besides these developments, Shell has announced the discovery of the first horizontal well of fractured oil and gas in Vaca Muerta. It is located in Sierras Blancas.. The area is under the control of O&G Developments Ltd. SA a subsidiary of Shell in a joint venture with local Medanito SA (25%) and state company Gas y Petroleo of Neuquen (10%) and will produce 85 cubic meters of gas per cubic meter of oil for a total production of 465 barrels per day.

See article attached for more information: The recovery of the Oil and Gas industry

DOW And YPF Signed A Mou To Jointly Explore The "Orejano" Area

James Fitterling, one of the Vice-presidents of Dow Chemical visited Argentina and discussed the future of PBB Polisur the polyurethane plant of Dow in Bahia Blanca which faces shortages of gas for full production. YPF and Dow are partners in Mega a company in the south of the Province of Buenos Aires and they will jointly explore the Orejano area. The investment could be in the 1,5 billion dollars range. YPF will contribute 50% with the area and Dow the capital.

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