Argentine state company Energia Argentina signed a contract June 16 with pipeline producer Tenaris, a critical step toward completing a pipeline to transfer natural gas from Argentina's giant Vaca Muerta shale formation.

The government says the pipeline will allow Argentina to forgo costly imports of LNG and reverse a large energy deficit that has limited the country's economic recovery.

The 563 km (350 miles) gas pipeline, which is in the first stage of construction, will provide a 25% boost in the volume of gas transferred from the Vaca Muerta megafield in the Patagonian province of Neuquen.

The contract signed June 16 consists of the purchase of 582 km (362 miles) of 36-inch diameter pipelines and 74 km (46 miles) of 30-inch pipelines.

This will be used for the first stage of the gas pipeline between Tratayén, in Neuquén, and Saliquelló, in the province of Buenos Aires, as well as in a number of other complementary projects.

The first stage of construction will take 18 months and require a public investment of more than $1.5 billion, the energy ministry said.

Vaca Muerta is the world's fourth largest unconventional oil reserve and second largest gas reserve.

Argentina's judiciary is currently reviewing the contract, which has been at the center of an internal dispute within the ruling center-left coalition.

Earlier this month, President Alberto Fernandez fired Production Minister Matias Kulfas, who had questioned the tender's details.

A legal case had also been opened to look into possible irregularities in the bidding process, but a federal judge ruled on June 16 to dismiss the case.

"The analysis of the tenders in question allows us to affirm that they complied with the guiding principles in the matter and were adapted to the current regulations that govern them," the court ruling said.

The court decision is expected to clear the way for the construction.

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