Snapshot: Vaca Muerta exit, Uruguay US$600mn e-methanol project permitting

Malaysian state hydrocarbons firm Petronas is looking to exit Argentina's Vaca Muerta shale formation, Bloomberg reported.

Petronas has already pulled out of Argentine counterpart YPF's early-stage LNG exporting project.

In 2014, Petronas formed a strategic alliance with YPF to jointly develop the La Amarga Chica license in Vaca Muerta, today one of the country's top-producing oil blocks. Petronas holds a 50% non-operating stake.

La Amarga Chica produced 11,381m3/d (71,650b/d) in December, according to operator data from local hydrocarbons chamber IAPG. National production was 127,172m3/d.

France's TotalEnergies is also looking to sell assets and Norwegian player Equinor is reportedly interested in doing so too.

TotalEnergies, Argentina's main gas producer, with onshore and offshore assets, is looking to offload only its stakes in shale oil acreage La Escalonada and Rincón de la Ceniza, where it is operator. The company partners with Shell and GyP at the areas.

At Vaca Muerta, Equinor has a 50% stake in YPF-operated Bajo del Toro and a 30% stake in YPF-operated Bandurria Sur.

YPF, Vista Energy, Pan American Energy, Chevron, Pluspetrol and Shell, particularly given their involvement in the Vaca Muerta Sur oil pipeline-terminal project consortium, could be on the lookout for M&As. 

Vaca Muerta Sur – in the early construction and financing phase – and a feeder duct project, Duplicar Norte, are designed to support output growth. The last big project, Duplicar, is being brought online.  

Meanwhile, ExxonMobil has sold upstream assets – with YPF and Pluspetrol the buyers – and so has Chilean state oil company Enap. 

A factor sometimes cited is Argentina's capital controls which President Javier Milei wants to lift by early January – a challenge given weak foreign reserves adequacy. Another driver could be the opportunity to sell, at a good price, shale oil assets to firms looking to enter Vaca Muerta, given the investment being made in export-focused debottlenecking infrastructure and the administration's deregulation push.

To get a local consultant's perspective, BNamericas spoke to Diego Calvetti (pictured), energy and natural resources partner and leader at the Argentine offices of global professional services firm KPMG.

BNamericas: What could be some of the main drivers of this activity/movement in the M&A arena? 

Calvetti: I don’t think we can attribute it to just a single issue related to Vaca Muerta or Argentina. It is true that there is a lot of movement in the local market in terms of the exit and entry of players, but each movement must be understood within the dynamics of each actor. 

Many times, this is related to the rebalancing of investment portfolios within different groups. For example, Exxon in Argentina with the sale of assets to focus on gas development in Central America, or Equinor, which has clear expertise in offshore, is looking to exit the unconventional Vaca Muerta play it had entered as part of its agreement with YPF. Now that YPF has announced its intention to focus on unconventional resources, Equinor finds a clear opportunity to capture additional value from the asset, or in the case of Total or of YPF itself, which, as I mentioned before, is looking to exit conventional resources, as Vista did two years ago, to concentrate efforts on unconventional resources.

That is, strategic decisions within each company are what reorient investment portfolios and, therefore, the need to divest or change the focus of investment. Clearly, these movements generate important opportunities either for small and medium local players who seek to enter more strongly into the operation – for example, Aconcagua or OilStone – or for more significant players who seek to boost their presence and grow in production – for example, Pluspetrol. The increase in production and investments in midstream also significantly contributes, and which tend to ensure an increase in the volume of production dispatch with a clear focus on exportation, whether of liquids or gas linked to LNG export projects.

E-methanol permitting

Uruguay's environment ministry published permitting documents corresponding to the US$628mn Tambor e-methanol project.

Officials uploaded an environmental impact study. Evaluation is one of several steps in the process to obtain the green light. 

Tambor has advanced past the project classification and environmental viability authorization stages. In another development, associated documentation for generation parks linked to another project – HIF Global’s US$6.0bn Paysandú initiative – was recently uploaded. 

Proposed for Tacuarembó department by company Belasay, Tambor involves building a production plant and associated wind and solar capacity of 394MW to produce 84,000t/y for export to the EU.

ALSO READ: Could this become one of Uruguay’s first green hydrogen derivatives export projects?

Carbon dioxide – used in e-methanol production – would be captured from a biomass boiler chimney at the Dank timber mill, about 160km north in Rivera department.

Tambor production would be taken by rail to Montevideo port, where reception and storage facilities are planned.

Other project components include a reservoir to store rainwater for production of key input green hydrogen. 

Solar and wind capacity would be installed and the plant would also have a grid connection to ensure no supply gaps.

The environment ministry has provided initial feedback on the Tambor environmental impact study.

ALSO READ 

Snapshot: The energy scenario awaiting Uruguay's incoming administration
The green hydrogen market segment where Uruguay could fly high
 Priming the pump - HIF Global working to ramp up e-fuels production