Patagonia, Argentina, is the site of Vaca Muerta, a geological formation known for its oil and gas reserves. Image: Gervacio Rosales  

Since taking office in late 2015, Argentinean president Mauricio Macri has prioritised investment in the energy sector to help reverse a costly energy deficit. Argentina’s abundant shale resources have attracted a growing number of major international companies, and attention has mostly been focused on the Vaca Muerta shale fields. Located in Patagonia they are one of the world’s largest reserves of shale gas.

The proposed investments revealed in YPF’s strategic plan for 2018-2022 indicate that the company intends to contribute $21.5bn directly, with the remainder coming from partnerships and associated companies.

 

Mauricio Macri has focused on increasing investment into Argentinian energy during his tenure as President.  Image: Marcos Corrêa/PR

YPF intends to ramp up oil production and continue the development of Argentina’s huge shale resources. The company said its non-conventional production is expected to grow by 150% over the period 2018-2022, with half of its hydrocarbon production coming from shale and tight oil and gas by 2022. The lifting of shale gas output will be helped by the continued fall in development costs.

Shale gas growth will increase the availability of natural gas liquids (NGLs) for chemical production. YPF estimates that the growth in shale gas will result in a 45% increase in its supply of NGLs between 2017 and 2022. YPF indicated that it has identified opportunities to invest in petrochemicals in Argentina, Brazil, Peru, Bolivia and Paraguay.

 

Shale oil and gas is accessed though hydraulic fracturing or ‘fracking’. Image:    

These investments would take advantage of the regional market imbalance together with shale gas growth, it said in its strategic plan, presented to investors in October 2017. ‘The region is a net petrochemical importer with room for a world scale complex,’ it added. 

There is room for one or two more ethylene sites, one or two methanol sites and two or three urea sites in the region, according to YPF.

The company said it is also developing opportunities to stimulate demand for natural gas, because demand in Argentina is highly seasonal. Opportunities include power generation, exports to Chile, Uruguay and Brazil, as well as petrochemical investments.

 

YPF is Argentina’s largest petrochemicals producer, with a capacity of 2.2m t/year. It has three plants, located in Ensenada, Plaza Huincul and Bahía Blanca. Output includes benzene, toluene, mixed-xylene, ortho-xylene, cyclohexane, solvents, methyl tert-butyl ether (MTBE), 1-butene, oxo alcohols, tert-amyl methyl ether (TAME), linear alkylbenzene (LAB), linear alkylbenzene sulfonate (LAS), polyisobutylene, maleic anhydride, methanol and urea. The Bahía Blanca site is operated by nitrogen fertiliser producer Profertil, a 50:50 joint venture with Canadian company Agrium.

Argentina’s potential for new petrochemicals investments was highlighted recently by Marcos Sabelli, president of the Latin American Petrochemical and Chemical Association (APLA). 

Speaking at the Latin American Energy Organization’s Forum on Regional Energy Integration in Buenos Aires, he said development of the Vaca Muerta shale fields improves the potential for steady feedstock supplies. 

‘We are proposing that we replicate the US model,’ he said. The US shale boom enabled the US to move from an importer to an exporter of petrochemicals. ‘Argentina has this potential. There is feedstock, market and companies,’ he added.

YPF said it is the largest shale operator outside North America, with a daily production exceeding 67,400 barrels of oil equivalent. The company participates in 50% of Argentina’s Vaca Muerta shale gas and oil reserves area, with more than 550 producing wells; 168 are horizontal. 

 

The Green River Formation, Colorado, US, is one of the richest oil deposits in the world. Image: National Park Service

Conventional hydrocarbons will remain the basis of the company’s production, with the development of more than 29 projects and the drilling of more than 1600 wells, it said. YPF has three refineries, accounting for 50% of Argentina´s capacity.

The company expects its production of oil and gas to grow by 5%/year over the next five years, reaching 700,000 barrels of oil equivalent per day in 2022. Exploration efforts will continue, with reserves targeted to rise by 50%. YPF also intends to boost its electricity production, much of it through renewables, as part of efforts to become a fully integrated energy company. YPF is pledging the investments at a time when President Macri’s pro-market government is on a drive to attract investments to consolidate an economic rebound after six years of stagnation.

 

YPF are hoping to up its production of oil and gas as energy resources by 5% a year by 2022. Image: Pixabay

Argentina’s GDP is forecast to grow by 2.9% in 2017 and 3.2% in 2018, according to the Organisation for Economic Co-operation and Development (OECD). The country’s shale gas boom, combined with economic growth, could make it an attractive candidate for a major new petrochemicals project.