BUENOS AIRES, May 22 (Reuters) - Argentina's state oil company YPF said on Monday it signed an agreement with Compania General de Combustibles (CGC) to drill the first exploratory well in the Palermo Aike shale formation, the second largest such deposit in the country.

YPF is set to drill the Fraccion II - El Cerrito well in a concession belonging to CGC after both firms signed a memorandum of understanding (MOU), YPF said in a statement.

Advertisement: The National Gas Company of Trinidad and Tobago Limited (NGC) NGC’s HSSE strategy is reflective and supportive of the organisational vision to become a leader in the global energy business. ngc.co.tt

The companies did not offer an investment figure or an estimated timeline for the well.

Palermo Aike, in the Patagonian province of Santa Cruz, is forecast to have shale oil reserves of some 10 billion barrels of oil equivalent. The deposit is considered the second most important shale play after Argentina's massive Vaca Muerta, the world's second largest shale gas reserve.

In the statement, YPF chairman Pablo Gonzalez hailed the deal as historic, adding that it marks the first exploration push for hydrocarbons trapped in dense shale rock in Santa Cruz province.

Argentina is looking to ramp up its oil production, which analysts believe will help reverse a longstanding energy deficit and allow the country to substitute pricy imports with local output.

YPF said that both companies will invest in additional wells and associated infrastructure in the event of new findings in the area, but did not provide further details. (Reporting by Eliana Raszewski; Writing by Carolina Pulice Editing by Marguerita Choy)