Argentina’s YPF sees natural gas as ‘growth vector’

Argentine state energy firm YPF said natural gas was its “growth vector,” as a private sector heavyweight Tecpetrol outlined ways to fully unlock the potential of the Vaca Muerta shale formation.

Argentine shale gas output has been on a downward trajectory since August 2019, when a record 1.11Bm3 was produced, according to data from the country’s energy department.

A 2020-24 government incentive program – Plan Gas 4 – has helped spur fracking in the formation. Officials are also working on a hydrocarbons promotion bill.

In April, YPF was the country’s second biggest shale gas producer, reporting output of 194Mm3 for the month.

Argentina’s overall gas production averaged 114Mm3/d in April, down from a peak of 144Mm3/d in August 2019. Shale accounted for 23% of output in the month, while conventionals accounted for 59.3% and tight gas the remainder. 

YPF strategy and business development manager Patricio Da Ré said the pandemic had prompted the company to reflect on its natural gas strategy.

“Despite everything, the focus, the direction, didn’t change,” Da Ré said during a webcast hosted by regional hydrocarbons association Arpel. “We continue seeing natural gas development as the growth vector; a growth vector of Argentina, but also within the sphere of future energies, transition energies in the world,” he said.

Da Ré added that, for the company, Plan Gas 4 meant “being able to develop our resources in a profitable way.”

He added that the Plan Gas 4 scheme, as producers inked supply contracts, provided visibility regarding demand and prices. 

YPF plans US$500mn of associated investments this year, with total planned outlay over the four years of Plan Gas 4 estimated at US$1.5bn.

LOOKING TO UNLOCK VACA MUERTA

Argentina’s biggest shale gas producer in April was Tecpetrol, which reported 283Mm3 for the month.

Ceferino Di Camillo, business planning manager at Tecpetrol, outlined hurdles that need clearing to better leverage the Vaca Muerta shale gas resources.

“What does Vaca Muerta need? The first and fundamental thing is clear rules that remain unchanged over time,” said Di Camillo during the event, held in collaboration with investment forum organizer EnergyNet and industry bodies International Gas Union and the Latin American Energy Organization.

Di Camillo said that during 2017 and 2018, “with clear rules and the right incentives” in under two years the company managed to bring the Fortín de Piedra acreage online and start producing around 12% of national supply.

He added that, conversely, policy uncertainty that emerged in 2019 when price controls were introduced amid economic turmoil had stymied production and investment.

Di Camillo said a second factor was spurring demand, citing improving gas transport infrastructure as a priority. 

He added: “Based on current activity and the forecasts of various operators, we see [20]22 the natural gas dispatch system of the Neuquén basin will be at full capacity in winter. We therefore need to remove barriers in the transport system to get Vaca Muerta gas to points of consumption.

“If we can achieve this, Vaca Muerta has the potential to boom as a resource,” he added.

Last year Argentina, amid economic pressure, put plans on hold to build a Vaca Muerta gas pipeline. 

Argentina faces natural gas supply shortages in winter months, when it relies on imports, typically LNG, to make up shortfalls, while the summer months see surpluses.

Boosting domestic output would reduce or remove reliance on winter imports and on purchases from neighbor Bolivia, whose own output is in decline.

This year Argentina is shipping in LNG via two ports to make up supply shortfalls. 

Di Camillo said Brazil, with its large manufacturing sector, and Chile, as it works to decarbonize its economy, offer export opportunities for Argentina’s natural gas industry. 

In terms of exporting energy to Brazil, potential options are exporting gas via Bolivia, building an Argentina-Brazil gas pipeline or constructing a gas-to-power plant, the webcast was told. 

NATURAL GAS SUPPLY

Pablo Erias, commercial manager of gas transporter TGN, said among the biggest near-term challenge in terms of supplying the domestic market was addressing falling output in Bolivia. 

Last year Bolivian natural gas exports to Argentina averaged 16Mm3/d and “the bulk of experts forecast a drop in exports of 3Mm3/d per year in the near future,” Erias said.

STORAGE

Di Camillo said underground storage of natural gas in depleted deposits could play a fundamental role in meeting demand during the winter months.

Argentina has storage projects underway, including initiatives involving Tecpetrol and YPF.

Di Camillo added, however, that a key hurdle, again, was building out transport infrastructure to get the gas to the end users in winter. Natural gas transport capacity shortfall was a “bottleneck,” he said.

Pictured: A gas well in Neuquén province. Credit: AFP