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Brazilian and Argentine firms team up on shale gas project

23rd July 2012

Brazil's Vale commits to shale gas project with YPF in Argentina

Brazilian and Argentine firms team up on shale gas project
Shale gas development will take place at the Lajas field in the country’s promising Neuquén Basin, in the southwest of the country, with shale gas resources of an estimated 23 billion boe.

A Brazillian mining firm has confirmed that it will go ahead with a multibillion dollar mining project in Argentina, it emerged on Friday. Shale gas will be developed as the project’s power source.

Brazil’s Vale SA has reiterated its committment to an estimated USD 6.5bn plan to construct a potassium mine in Mendoza, Argentina, and will invest USD 1bn this year to move ahead with construction.

Vale acquired the mine project from global mining and metals company Rio Tinto PLC in 2009.
Argentine President Cristina Fernandez de Kirchner announced the project’s go ahead on Thursday and said it would make Argentina the world’s third largest exporter of potassium.

The mine’s resource return potential is estimated at 4.3 million tonnes per year of potassium for use as a fertilizer.

Vale will also partner with Argentina’s state-run oil company YPF for the development of shale gas. YPF accounts for a third of the country's oil production and nearly a quarter of its 120 million cubic meters per day of gas.

Shale gas development will take place at the Lajas field in the country’s promising Neuquén Basin, in the southwest of the country, an area rich in gas. The area is said to hold an estimated 23 billion boe of shale gas. Eight wells have been drilled so far, Argentina’s government said.

“From an energetic point of view, the Rio Colorado project, where Vale and YPF will take up an equal share in production, is developping quite well,” Vale’s global director of energy in Brazil João Coral told OGT. “We’ve had some very positive feedback regarding the technical and economic viability of the wells drilled so far and we are very optimistic.”

The fact that both parties have confirmed the project is on track will likely calm investors, as concerns had been raised regarding YPF’s nationalization of the 51 per cent stake Spain’s Repsol held in the firm.

“The gas project is certainly demanding, but we believe that the production of gas from these projects that we hold in partnership with YPF will be enough to power the plant,” Coral added. “If it is not, our contract with YPF includes a clause which guarantees right of preference in the purchase of their energetic production.”
The final decision will be announced on Thursday.

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