(Adds YPF chairman comments on investment plans)
BUENOS AIRES, Jan 10 (Reuters) - Argentina has clinched adeal with labor unions and energy companies aimed at luringinvestors to the Vaca Muerta formation in Patagonia, one ofthe largest shale reserves in the world, the government said onTuesday.
Vaca Muerta has attracted investment from Chevron Corp and Exxon Mobil Corp. But the formation, whichis about the size of Belgium, remains mostly unexplored, largelydue to high production costs and a lack of labor flexibility,oil major executives have said.
As part of the pact, Argentina will offer a subsidized priceof $7.50 per million British thermal units of natural gasproduced at new wells through 2020. The price, which is morethan double that of front-month natural gas futures onthe New York Mercantile Exchange, is "indispensable forattracting long-term investment," the government said in astatement.
Companies including state-owned YPF SA, Chevron,Total SA, Royal Dutch Shell Plc and BP unitPan American Energy LLC will invest $5 billion to tapthe formation in 2017 and double that in coming years as part ofthe deal, President Mauricio Macri said in a televised address.
YPF now plans to invest $2.3 billion in Vaca Muerta in 2017,20 percent to 30 percent more than it would have without thedeal, chairman Miguel Gutierrez told reporters after theannouncement.
The other companies either declined to comment or did notimmediately respond to requests for comment on their specificplans.
YPF shares on Argentina's Merval stock index jumped10.5 percent on Tuesday to 321 pesos ($20.25), their highestlevel since August 2015.
Argentina suffers from a substantial energy shortage, amajor cause of its wide fiscal deficit. The government hascalculated Vaca Muerta would need total long-term investment of$200 billion to reverse the country's sustained energy shortage.
Neuquen province, where most of the formation is located,will stabilize taxes as part of the deal and labor unions havesigned on to more flexible contracts. Strikes are common inArgentina, where high inflation often strains relations betweenpowerful unions and management.
The $7.50 per mmBtu price matches the subsidized price underArgentina's "Gas Plan" launched in 2013 to stimulate productionat existing wells.
The government also subsidizes locally produced oil toencourage domestic production. But employment in the sector hadbeen affected by an increase in fuel imports spurred by worldcrude prices that are well below local prices.
Of the 19 concessions awarded in Vaca Muerta so far, justtwo have started producing. The government hopes the agreementwill spur development in the remaining 17.
While initial additional production would likely go towardclosing the domestic energy gap, last weekend Argentina alloweda 15-year-old export duty on oil and oil products to expire.
Vaca Muerta contains 308 trillion cubic feet of shale gasand 16.2 billion barrels of shale oil, according to the U.S.Energy Information Administration. ($1 = 15.8500 Argentine pesos) (Reporting by Nicolas Misculin, Luc Cohen and Hugh Bronstein;Additional reporting by Ernest Scheyder in Houston; Editing byMeredith Mazzilli)
