Argentina's state-run oil company YPF and global oil major Shell have signed a major agreement to develop the country’s flagship liquefied natural gas (LNG) project. The deal, announced on Thursday, represents a significant milestone in Argentina’s push to become a key global supplier of natural gas. The multi-stage $50 billion Argentina LNG project aims to produce, and export liquefied natural gas to major global markets, with a focus on strengthening Argentina's position in the energy sector.

The agreement was formalized in the Netherlands and brings Shell on board for the first phase of the project, which is set to produce 10 million metric tons of LNG annually. The first phase will focus on extracting gas from Argentina's Vaca Muerta formation, one of the world’s largest unconventional gas reserves. The gas will be transported to the coastal province of Río Negro, where it will be processed and exported. Initially, LNG vessels will be used for the transportation of the gas, with plans for future phases to include the construction of onshore LNG facilities.

YPF President Horacio Marin expressed his satisfaction with the deal, stating, “We are proud that Shell, a world leader in LNG production, is joining the project. As a pioneer in the LNG market, Shell's knowledge and experience will be instrumental in helping to position Argentina as a reliable and competitive global energy supplier.” Shell, which has a long-standing expertise in LNG production, echoed this sentiment, noting that the agreement aligns with its strategy to continue to expand its LNG business.

The partnership with Shell also signals the end of Malaysia's Petronas' participation in the project. According to the announcement, Petronas will no longer be involved in the Argentina LNG initiative but will continue to collaborate with YPF in the development of the La Amarga Chica area, another part of the Vaca Muerta formation. This shift in project participants comes as part of ongoing efforts to streamline and optimize the development of Argentina’s vast shale gas and oil resources.

The Argentina LNG project is expected to significantly boost the country’s natural gas production, which has already seen a considerable growth in recent years thanks to the development of Vaca Muerta. The project is poised to help Argentina become a more prominent player in the global energy market, particularly as European and Asian markets look to diversify their sources of LNG in the wake of disruptions to Russian energy supplies.