Where Argentina’s YPF plans to deploy its US$3.7bn capex for 2022

Argentine state oil and gas company YPF confirmed a US$1bn increase in capex this year to US$3.7bn.

A big chunk – US$2.8bn – is earmarked for upstream operations, YPF’s 4Q21 results call was told.

Officials have assigned US$1.6bn of upstream outlay to the unconventional hydrocarbons segment, which accounted for 45% of company production of 484,000boe/d in 4Q21, up from 33% in the same period of 2020. 

Around half of the US$1.6bn targets YPF’s Vaca Muerta shale oil hub operations, namely, the Loma Campana, La Amarga Chica, Bandurria Sur and Aguada de Chañar blocks.

Investment in the hub includes US$100mn in infrastructure, among projects a third train at the oil-treatment facility at La Amarga Chica and a new treatment facility at Bandurria Sur.

YPF – which expects to see hydrocarbons production climb 8% this year after flat growth in 2021 – has also assigned US$700mn to downstream operations and US$200mn to other areas. 

GAS, OIL PIPELINES

In parallel, YPF is working to help ensure midstream oil and gas infrastructure at Vaca Muerta can handle future output growth. 

Against a backdrop of climbing unconventionals production, natural gas dispatch infrastructure is close to capacity and oil duct capacity also needs boosting.

Upstream companies operating at the Neuquina basin, home to Vaca Muerta, increased production in 2021. Overall oil production at the basin was 50,900m3/d (320,151b/d) in December, up 34.3% year-on-year, according to a report published by think tank the General Mosconi energy institute. 

“Given the current state of production out of the Neuquina basin, and taking into consideration future growth plans, we have decided to emphasize our focus in coordinating midstream initiatives to debottleneck the future evacuation of oil and gas production out of Vaca Muerta,” YPF CEO Sergio Affronti said during the call.

“We have created two new business units within our organization to lead the efforts on both the midstream oil and midstream gas fronts.”

The teams, he said, have the “critical task of identifying and executing all necessary plans to enlarge processing and transportation capacity.”

Initiatives cited include interconnection work related to the government’s planned new Vaca Muerta gas transport pipeline, known as the Presidente Néstor Kirchner duct and currently at the tendering phase. 

YPF also cited projects underway to bring the Argentina-Chile Transandino oil pipeline back online and to expand pumping capacity of domestic infrastructure operated by concessionaire Oldelval. YPF is a stakeholder in both companies.

A US$50mn project targeting an Oldelval duct carrying oil to the Puerto Rosales terminal is expected to increase pumping capacity 10%, or by around 25,000b/d, and to wrap up this half. Following further investment, of around US$450mn, in the revamping of four pumping stations and construction of over 500km of new loops, capacity is expected to grow by a further 200,000b/d of capacity in 2023. Puerto Rosales terminal oil storage capacity expansion work is also planned.

Work on the Transandino oil export pipeline, which will have initial export capacity of 35,000b/d, is due to conclude by early next year. Following completion of a second stage later that year, involving a new 150km feeder duct from Vaca Muerta, capacity should grow to over 100,000b/d in the second half of 2023.

Omar Gutiérrez, governor of Neuquén, the country’s No. 1 hydrocarbons-producing province, recently said oil and gas pipeline construction and expansion work was “fundamental.”  

In terms of downstream, Affronti said the company would continue executing a multi-year plan to revamp its La Plata and Luján de Cuyo refineries to adapt to new fuel specification requirements. Associated outlay this year is estimated at US$150mn-200mn. Other downstream work this year includes maintenance and completion of works that will permit processing of lighter crudes. 

PRODUCTION GUIDANCE

Production guidance for 2022 comprises a 6% increase in crude oil to 224,000b/d (with shale output climbing 45%) and a 5% rise in natural gas to 37Mm3/d (with shale gas rising 40%).

BOTTOM LINE

Despite seeing revenue climb 41.2% to US$13.3bn in 2021, driven by stronger production and prices, YPF remained in the red. The company posted a loss of US$34mn, down from a loss of around US$1.10bn in 2020.