Argentina’s YPF sheds more light on LNG strategy, conventional field divestment

Argentine state-controlled hydrocarbons firm YPF plans to start exporting LNG via Río Negro province, where the company is looking to build a hydrocarbons terminal in the vicinity of Punta Colorada.

Officials are aiming to dispatch the first shipment in 2026-27 using a liquefaction vessel, YPF chairman and president Horacio Marín told a conference hosted by local media outlets LM Neuquén, Más Energía and Econojournal.

Plans envisage the addition of two more vessels in 2029-30 in a second phase, and construction, in a third stage, of an onshore plant in 2031, for eventual overall capacity of 120Mm3/d. Three dedicated gas pipelines are planned and exportation via Buenos Aires is also being mulled. 

In comparison, Argentine gas production in February was 134Mm3/d (million cubic meters), up 3.2% year-on-year, according to a report from the General Mosconi institute energy think tank. Amid increased production and midstream expansion – chiefly the Vaca Muerta duct – the price of gas on the domestic market is forecast to fall.

YPF cited dampened domestic gas price prospects as a factor behind a non-recurring US$2.29bn impairment charge logged in 4Q23.

Meanwhile, YPF is working on the LNG project, which is currently in the engineering phase and branded ARG LNG, with Malaysian counterpart Petronas.

Producers in the Vaca Muerta unconventionals hydrocarbons formation have been brought onboard to help spread investment costs. Joining forces is the "only way" to do it, Marín said. “YPF has to develop for Argentina and to be collaborative with the industry.”

Reflecting this, local gas heavyweight Pampa Energía recently said it was interested in being involved in the YPF project, citing economies of scale. At the time, the company said its own project, a smaller, modular configuration developed with US logistics player Excelerate Energy, may “lack the necessary competitiveness.” 

Marín said that, personally, he preferred exporting gas to neighbor Brazil in the form of LNG, indicating that it could be redirected to other markets if Brazilian demand slackened because of higher presalt associated gas output. 

Brazil is currently looking at ways of easing reliance on Bolivia, whose output is trending down. Argentina, Bolivia and Brazil have engaged in talks about potentially exporting Vaca Muerta gas to Brazil through Bolivian pipelines.

YPF has an oil pipeline and export terminal project that targets Río Negro, known as Vaca Muerta Sur, which Marín said would be brought into service by July 2026 and debottleneck production in the Neuquén basin, which hosts Vaca Muerta.

Marín said an end-goal behind company plans was achieving national energy exports of US$30bn a year in 2030, by spurring oil exports and beginning LNG dispatch. 

He added that another objective of YPF was, this year, achieving oil export price parity, a development that comes as Argentina works to shift away from a scheme where the government, refiners and producers have been jointly setting a local crude price. 

Argentine oil production was 108,200m3/d (681,000b/d) in February, up 6.7% year-on-year. Marín has said the country should aim for oil production of 1Mb/d (million barrels) by 2030, driven by Vaca Muerta. 

As things stand, transport capacity between the Neuquén basin and the Atlantic is forecast to hit the 540,000b/d mark next year. The Otasa duct carrying crude to Chile has capacity of 110,000b/d, while Vaca Muerta Sur is due to add up to 800,000b/d once the multi-phase project is complete.

EXIT FROM 55 MATURE CONVENTIONAL FIELDS

YPF’s board recently greenlit a plan to offload 55 areas, a move that would release capex that, in turn, would be redirected to Vaca Muerta, on which the company is betting heavily. 

The company, along with other upstream players, is eyeing increased exports, with appetites whetted by prices and by midstream expansion work being carried out to support higher production. 

A definitive list of the areas has not yet been published, although YPF confirmed they were grouped into clusters in Mendoza, Neuquén, Río Negro, Chubut and Tierra del Fuego provinces.

The acreage encompassed in the divestment strategy accounts for around 60% of conventional oil production of YPF and 40% of its conventional gas output.

The million-dollar question being asked is what level of interest will be shown in YPF’s conventional assets, which are not expected to be among the company’s most profitable.

YPF officials have started to present plans to the private sector in North America.

Spanish bank Santander is facilitating the divestment process, which YPF wants to conclude in September. Around 60 companies have registered interest.

In related upstream news, two logistics vessels have arrived in Argentina ahead of the planned drilling of Argentina Norte basin exploration well Argerich-1, Más Energía reported.