Sources: YPF, Petronas Expected to Enter Deal to Build New Gas Pipeline in Argentina

(Reuters) — Argentine oil company YPF and Malaysian state energy firm Petronas are in talks over plans to build a new gas pipeline in the South American nation and an LNG plant, a source close to YPF told Reuters on Thursday.

The two sides are expected to sign an early-stage agreement on Thursday, the source said. The office of Argentina's president said in a statement that the two firms would cement an "alliance" related to the development of unconventional gas in Argentina.

Home to the huge Vaca Muerta shale formation, Argentina is looking to ramp up gas production and LNG export capacity to help cut its reliance on expensive gas imports and bring in much-needed foreign currency to replenish dwindling reserves.

The agreement, if it comes to fruition, could generate investment of up to $40 billion over 10 years, the source close to YPF said on condition of anonymity as the information was not official. The source gave no further details on the plan.

Petronas did not respond to an emailed request for comment.

YPF and Petronas have worked together before. At the end of 2018, the companies announced investments of $2.3 billion to develop shale oil in a block in Vaca Muerta, the world's second-largest shale gas reserve and fourth-largest shale oil reserve.

Argentina is already working on a separate new pipeline from Vaca Muerta to increase gas transport capacity, while the government has publicly said it wants to create the infrastructure to allow LNG exports.

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