Argentina's state-run energy company YPF says it has signed a memorandum of understanding with the local subsidiary of Dow Chemical to develop shale gas in the southern Neuquen province. The Neuquen basin, located at the northern end of Patagonia, is thought to hold some of the world's richest oil and shale gas reserves. It includes the 30,000 square kilometer Vaca Muerta (Dead Cow) shale reserve. The agreement states that both companies will negotiate terms and conditions for a joint venture in which YPF will give Dow Chemical a 50 percent stake in developing the 42 square kilometer El Orejano bloc. "This agreement strengthens Dow's competitive position, consolidates our relationship with YPF, and reflects our commitment and contribution to the economic and industrial development of Argentina," said Jorge La Roza, Dow Argentina's CEO for southern Latin America, on Tuesday. YPF put into production early this month its first unconventional hydrocarbon well in Vaca Muerta, the statement added. "Unconventional" refers to oil and gas deposits like oil shale, where the hydrocarbons are tapped not by conventional wells but instead must be released by methods like fracking, designed to free the reserves by fracturing the source rock. Argentina seized YPF from Repsol in 2012, accusing the Spanish oil giant of allowing oil and gas production to lapse and forcing Argentina's oil import bill to rise. The Vaca Muerta reserve places Argentina third, behind the United States and China, among 32 countries listed in a US Energy Department study of unconventional hydrocarbon resources.