BUENOS AIRES Argentina's Tecpetrol, part of the Techint Group, said on Thursday it would invest $2.3 billion in the Vaca Muerta shale fields through 2019, the largest announcement in the formation in years.
Tecpetrol said in a statement the investment was made possibly due to measures from President Mauricio Macri's government, including a deal with labor unions earlier this year and a definition of price supports this month.
Tecpetrol will aim to produce an average 14 million cubic meters (494 cubic feet) of shale gas per day by 2019 said Guillermo Pereyra, a union leader and senator who participated in a Thursday meeting where executives communicated the plan to Macri.
That is half the amount of gas Argentina currently imports, Pereyra said, and will help Macri's government reach its goal of energy self efficiency. An energy deficit is a major contributor to Argentina's fiscal deficit.
About the size of Belgium, the Vaca Muerta formation is one of the largest shale reserves in the world but it has been mostly unexplored due to high production costs and lack of labor flexibility.
The investment would eventually result in 1,000 new jobs, Pereyra and Tecpetrol said.
"We are going to arrive in September with five or six drilling teams, each one with about 100 people, this is very important," Pereyra said in a telephone interview.
Macri's government in January announced an agreement with oil companies and unions to lower labor costs and stimulate investments, which until now have been slow to arrive.
YPF said it reached a preliminary deal with Royal Dutch Shell Plc last month to develop oil and gas assets in Vaca Muerta involving a $300 million investment from Shell.
Earlier this month the government said it would gradually lower the price it guarantees for gas drilled from new wells, currently $7.50 per million British thermal units of gas, to encourage investment sooner rather than later.
Vaca Muerta contains 308 trillion cubic feet of shale gas and 16.2 billion barrels of shale oil, according to the U.S. Energy Information Administration.
Tecpetrol has been carrying out a pilot project in the Fortin de Piedra area and will now move on to the development phase, Pereyra said.
The company said it planned to drill 150 wells in the next three years, with $1.6 billion of the investment going toward the wells and $700 million to be used for treatment and gas transport installations, Tecpetrol said.
(Reporting by Eliana Raszewski; Additional reporting by Walter Bianchi and Juliana Castilla; Writing by Caroline Stauffer; Editing by Andrew Hay, Bernard Orr)