Dow Weighs Exiting Argentina's Top Shale Gas Play, Minister Says

(Bloomberg) -- Dow Chemical Co. is reviewing its joint venture with state-run YPF SA in Argentina’s flagship shale gas program, said Energy Minister Juan Jose Aranguren.

A spokeswoman for Dow didn’t immediately comment. YPF didn’t comment.

Dow signed the agreement to develop the 11,000-acre El Orejano in 2013 to secure gas supply for its traditional petrochemical business in the port city of Bahia Blanca. After a joint initial investment of about $190 million for 16 wells, there are now 44 wells producing 3 million cubic meters a day, according to YPF. Dow and YPF are still valuing the asset, Aranguren said in Buenos Aires in an interview.

Dow’s exit would come at a time when YPF is seeking to lure investors to Vaca Muerta, one of the biggest shale oil and gas formations outside of North America. It is still largely untapped. The company has a key shale oil operation with Chevron Corp. and newer pilot agreements with Royal Dutch Shell Plc and Schlumberger Ltd. It is in talks for two more joint ventures, YPF Chief Financial Officer Daniel Gonzalez said in an Aug. 9 earnings call.

Subsidized Shale

Argentina is subsidizing shale gas producers in Vaca Muerta in a bid to spur development, with hopes of ending expensive imports of liquefied natural gas by 2021 or 2022 and even exporting to countries like Japan and South Korea in the following years, Aranguren said.

Dow is looking at additional investments in petrochemical manufacturing in Bahia Blanca, Aranguren said. A spokeswoman for Dow didn’t immediately comment.

Dow and DuPont Co., the two largest U.S. chemical makers, have received all the regulatory approvals needed to close a historic merger. The deal will be completed after the stock market closes on Aug. 31. The companies, with a combined market value approaching $150 billion, would surpass BASF SE as the world’s largest chemical company. Within 18 months of closing, DowDuPont has said it will split into three separate companies focused on agriculture, specialty products and materials.