OREANDA-NEWS. Argentina's state-controlled YPF and the Argentinian unit of US-based Dow Chemical will invest $500mn in 2016 to triple production at their existing shale gas joint venture, marking the first major upstream investment since a new government took over last week.

The companies are partners in the El Orejano block, located in the Vaca Muerta shale formation in the southwestern province of Neuquen. The new investment is aimed at increasing production to 2mn m3/d (70.6mn ft3/d) by the end of 2016, from a current 750,000 m3/d, YPF said.

The two firms have been working together since 2013 on the country's first large-scale shale gas project and have already invested $350mn in the block.

The fresh investment, which would be divided equally between the two companies, would involve drilling 30 new horizontal wells with four rigs. The block currently has 19 wells in production.

"Vaca Muerta is a great opportunity for Dow because it allows us to have access to gas that is the main raw material in the petrochemical industry," Dow Argentina chief executive Gaston Remy said.

To fully develop the 45km2 (17.4mi2) block, investment could eventually reach $2.5bn to drill more than 180 wells and set up associated infrastructure, YPF said.

"We are seeing extraordinary results and it encourages us that a leader in the petrochemical industry trusts YPF for its first upstream development," YPF chief executive Miguel Galuccio said.

Galuccio and Remy met with new president Mauricio Macri today to inform him of the expected investment. Under the previous government, many oil companies had remained on the sidelines because of operating conditions deemed hostile to investment.

Whether Galuccio will remain at the helm of YPF under Macri is still unclear.

Dow Argentina and YPF are also partners, along with Brazil's state-controlled Petrobras, in LPG fractionator Mega. Mega processes about 13bn m?/yr of gas, separating out 540,000 t of ethane, 600,000 t of propane and butane and 210,000 t of natural gasoline.

Argentina's gas production climbed by 3pc in January-September 2015 to 117.4mn m3/d, compared to the same period last year, according to the latest figures from the newly created energy and mining ministry.