MALAYSIA’S state-owned energy company Petronas has signed a US$550 million deal with its Argentina counterpart YPF to develop a section of Patagonia’s massive Vaca Muerta shale oil field.

The Argentina field, one of the world’s biggest known shale oil deposits, could be drilled with a further 900 development wells, following the companies’ evaluation of the play with an initial 35 well drilling program and 3D seismic studies.

The plummeting oil price failed to derail the deal after a preliminary agreement was struck in August when oil prices were more than 40 per cent higher than current Brent prices.

The 18,700 hectare La Amarga Chica block in Neuquén province will be the site of the pilot drilling program, with authorities granting the companies a 35 year concession to produce in the area.

The deal follows Argentina’s introduction of a new regulatory framework designed to boost international investment in shale projects and restore energy self-sufficiency for the South American nation.

Petronas will finance the initial US$475 million drilling program, YPF will operate the project, while further spending will be split between the two companies if drilling moves beyond the pilot stage.

YPF and Petronas chief executives Miguel Galuccio and Shamsul Azhar Abbas signed the agreement in Kuala Lumpur on 12 December.

“This agreement validates the world class asset, the Vaca Muerta,” Mr Galuccio said.

“I feel enormous pride that companies the size of Petronas continue believing in YPF as their partner of choice to develop unconventional in our country.

“[The agreement] shows there are companies willing to go on, go for the long term, and move along with YPF in a virtuous scheme investment, [with] production and growth continue to contribute to our primary goal of returning to Argentina to energy self-sufficiency. “

YPF, which was renationalised in 2012 following almost 20 years of private operatorship, has progressively been bringing in partners to assist development of the massive formation, thought to contain at least 23 billion barrels of oil.

The company partnered with Chevron in 2013 to develop the Loma La Lata Norte and Loma Campaña blocks, which are now producing 35,000 barrels of oil a day.