As Vaca Muerta pipeline project advances, YPF accelerates gas plant plans

Argentina’s biggest hydrocarbons producer, state-controlled YPF, is bringing forward construction of a gas-processing plant, citing the extra transport capacity that the Vaca Muerta pipeline megaproject will create.

The company has made an upward revision to capex guidance for this year, raising it by 10% to around US$4bn, with the increase chiefly corresponding to the gas plant project as well as the drilling and completion of 20 additional shale wells and the impact of inflation on costs.

Officials aim to break ground on the facility this half of the year. It was originally due to be built in 2025 and is the second of two on the drawing board, the first planned for 2024 and linked to YPF’s commitments under production incentives program Plan Gas.

Argentine gas transporter TGS is also investing in gas processing capacity. 

VACA MUERTA PIPELINE

YPF is preparing for the entrance into service of the first phase of the publicly funded Vaca Muerta pipeline project, also known as Presidente Néstor Kirchner. Scheduled to be built by around the middle of 2023, the first phase would increase gas dispatch capacity from the Neuquén basin – where outbound transport capacity is strained – by around 10Mm3/d.

“The idea for that is to be ready to supply further gas production for when the new evacuation capacity comes online through the Néstor Kirchner pipeline … available hopefully next year,” YPF CFO Alejandro Lew said during the company’s 2Q22 results call.

“So, we want to be ready to be able to supply part of that incremental capacity,” he added.

Government officials signed construction contracts this week. 

GAS PRODUCTION

Companies operating in unconventionals play Vaca Muerta in the Neuquén basin pumped out 53.4Mm3/d gas in June, up 38.7% year-on-year, according to data published by energy think tank General Mosconi institute. YPF accounted for 15.8Mm3/d, up 32.3% year-on-year.

YPF’s overall gas production in 2Q22 was 37.6Mm3/d, up 10.4% year-on-year. Shale gas accounted for 15.5Mm3/d of the total, up 80.5% year-on-year, conventionals 15.2Mm3/d (down 14.1%) and tight 7.0Mm3/d (down 10.8%).

OIL PRODUCTION 

Meanwhile on the oil front, Lew said the company was bringing forward construction of a 150km pipeline that will connect its core shale assets in Añelo, Neuquén, to refining facilities and an Argentina-Chile export pipeline in the north of the province that is due to resume operations in early 2023. 

The transport capacity range of the Otasa export duct – which YPF operates with Chilean counterpart Enap – is 8,000m3/d to 17,500m3/d.

Companies in Vaca Muerta produced 37,100m3/d of oil in June, up 52.9% year-on-year, according to General Mosconi institute data. YPF accounted for 21,200m3/d, up 48.3% year-on-year.

YPF’s total crude oil production in 2Q22 averaged 225,300b/d (35,819m3/d), up 7.2% year-on-year, the company said in a results release. Shale accounted for 73,900b/d, up 48.3% year-on-year, with conventionals at 148,300b/d (down 5.6%) and tight at 3,200b/d (down 4.5%). 

Despite being Argentina’s biggest oil producer, YPF’s current output is absorbed by the domestic market. The company said it aimed to be exporting 100,000b/d (15,898m3/d) crude to Chile by end-2023.

On the domestic transport front, midstream player Oldelval – partly owned by YPF – has announced plans to expand capacity between the basin and Buenos Aires.

Lew told the webinar that YPF aimed to double oil production by 2026. Unless Argentina expands refining capacity, increased output would be exported.

ALSO READ: Argentine oil transporter Oldelval outlines US$1.7bn investment plan for 2022-37

Enap and YPF recently signed a memorandum of understanding on exploring opportunities in Vaca Muerta. Enap unit Enap Sipetrol already operates in Argentina in partnership with YPF. Enap Sipetrol's oil production in Argentina has been sliding since at least 2016, according to information in the company’s 2021 annual report. Oil output last year was 1.55Mb (million barrels), down from 1.87Mb in 2020 and 3.04Mb in 2016. The company cited natural declines at the deposits.  

BOTTOM LINE

YPF posted a profit of US$798mn for 2Q22 – the highest quarterly bottom line in the company’s history, as revenue climbed 83%. This follows a loss of US$492mn in 2Q21, amid lower operating income and higher income tax charges.