Chile's Enap eyeing upstream exit from Argentina

In the latest development in Argentina’s upstream industry, Chilean state oil company Enap announced plans to sell its Argentine subsidiary and associated assets.

The news comes after Enap’s local partner, state-controlled YPF, said it would offload 55 mature conventional fields and redirect capex into the Vaca Muerta unconventionals formation.

The bulk of upstream investment in Argentina today is being deployed at Vaca Muerta while midstream capacity is being expanded and the administration of President Javier Milei eyes sector deregulation to help spur outlay and exports. 

With YPF, Enap Sipetrol Argentina produces hydrocarbons offshore and onshore and two years ago the two signed an MOU to explore joint production and export opportunities at Vaca Muerta.

Juan José Carbajales, director of Argentine energy, mining, environmental and policy consulting firm Paspartú, referred to the movement being observed on Argentina’s policy and energy chessboard.

YPF’s divestment plan includes licenses shared with Enap Sipetrol Argentina. 

“With the change of government, which proposes a model of deregulation of the hydrocarbon market, added to YPF’s new business plan, that trans-Andean alliance seems to be fracturing, since the Argentine national company began a process of disinvestment in areas shared with Enap,” Carbajales, a former federal government hydrocarbons chief, told BNamericas.

“Ergo, it seems logical to conclude that Chile’s bet will be 100% on Vaca Muerta crude oil.”

Enap plans to double down on Vaca Muerta crude, which is imported via the Otasa link connecting Enap’s Biobío refinery and which was brought back into service in 2023 after being mothballed. Today, Enap receives about 250,000m3 a month, or around 52,000b/d, from Vaca Muerta. 

On the divestment decision, Enap, present in Argentina since 1991, said financial factors combined with a commitment to the sustainability of the company over the long term were drivers.

Meanwhile, elsewhere on the Argentine upstream map, US major ExxonMobil is working to divest Vaca Muerta shale acreage and has relinquished offshore exploration rights, while Colombia’s GeoPark has submitted an offer to obtain non-operating stakes in unconventional blocks in the Neuquén basin, home to most of Vaca Muerta. 

The million-dollar question being asked, however, 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. The acreage encompassed in the divestment strategy accounts for around 60% of conventional oil production of YPF and 40% of its conventional gas output.

ENAP SIPETROL ARGENTINA

Assets

Enap Sipetrol Argentina has stakes of 50% in the Magallanes, CAM 2A Sur, Campamento Central-Cañadón Perdido and Petrofaro licenses, according to information in Enap’s full-year 2023 financial report.

The company also participates in exploration blocks El Turbio Este (50%), La Invernada (50%) and E2 (33%).

Enap’s chief producing asset is the offshore Magallanes block, in Santa Cruz and Tierra del Fuego provinces and federal waters.

Enap also holds a 36% stake in oil export pipeline concessionaire Oleoducto Transandino, or Otasa. Other stakeholders are YPF and US major Chevron. 

Production, reserves, capex

Enap production in Argentina in 4Q23 was 10,000boe/d, with around 70% natural gas, according to a results presentation. 

Enap’s 2023-27 business plan earmarked US$826mn for its foreign units, including a nondisclosed chunk for secondary and tertiary recovery projects in Argentina.

The Magallanes acreage, in the Austral basin, is home to five Enap-operated platforms which produced 669,000b oil (about 1,830b/d) and 524Mm3 gas (about 1.44Mm3/d) in 2022, according to information in Enap’s annual report for that year. Compared with 2021, production was down 22% and 21%, respectively, on account of a natural output decline.

A US$700mn offshore project, branded Fénix and being carried out by the CMA-1 consortium – formed by Total Austral, Pan American Energy and Wintershall Dea – is expected to compensate for a general decline in basin production. 

Located onshore in Chubut province and where Argentina first struck oil in 1907, the YPF-operated Campamento Central-Cañadón Perdido license produced 551,000b oil (around 1,510b/d) in 2022, down 20% on account of a natural decline and technical problems. 

At the end of last year, Argentina accounted for 17% of the 125Mboe (million barrels of oil equivalent) total reserves of Enap, which also operates in its home market of Chile as well as in Ecuador and Egypt.

Enap Argentina E&P capex for 2023 was US$14mn, up from US$8mn in 2022.

Financials

For 2023, Enap Sipetrol Argentina posted a loss of US$110mn compared with earnings of US$5.66mn in 2022.

As of end-2023, Enap Sipetrol Argentina had net negative equity of US$66.3mn, reflecting the recognition of an US$173mn impairment charge, driven primarily by an expected drop in gas prices in the local market linked to forecast supply growth.

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

On a consolidated basis, Enap posted a profit of US$566mn for 2023, down from US$575mn in 2022. Enap has a five-year investment plan of around US$3.5bn.