Argentina seals a key agreement with Petronas for Vaca Muerta gas

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The Malaysian oil company Petronas and Argentina’s YPF (BA: YPFD ) signed an agreement on Thursday with a view to investing 10,000 million dollars to build a gas liquefaction plant in Argentina, a key work for the development of the colossal Vaca Muerta unconventional hydrocarbon formation.

“Today we are making a sovereign decision, deepening the bond with Petronas. We are taking a huge step. In ten years someone will remember this day,” said Argentine President Alberto Fernández at the signing ceremony of the agreement held in Buenos Aires. .

The agreement provides for the study and joint development of a project to produce liquefied natural gas (LNG) that will include the production of unconventional gas, the construction of gas pipelines and other infrastructure, industrialization, marketing and international logistics.

The project seeks to take advantage of the leadership position of YPF, a company controlled by the Argentine State, in the development of Vaca Muerta and Petronas’ experience in the operation of LNG liquefaction facilities.

“There will be challenges to address as we move forward. That is why we hope to have the support of the Government of Argentina and that of our partner, YPF. We hope that this alliance will continue to strengthen in the future,” said the president of the Malaysian state oil company, Tengku Muhammad Taufik.

POTENTIAL

The natural gas to be used will come from Vaca Muerta, in southwestern Argentina, the world’s second largest unconventional gas reserve and the fourth largest oil reserve of its kind.

“We have gas reserves for 171 years,” stressed the president of YPF, Pablo González.

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According to YPF, the project will require an investment of 10,000 million dollars in the first stage, which will allow the production of up to 5 million tons of LNG per year.

Within 10 years, when the project is completed, it will be possible to produce and export some 25 million tons of LNG per year.

DEAD COW DEVELOPMENT

The project announced this Thursday will be essential for the development of Vaca Muerta since until now the gas extracted from that formation is destined to supply the domestic market and Chile.

“We are achieving the objective that we have set for ourselves: not letting the gas sleep in Vaca Muerta, get it out as soon as we can, use what we need, export and make profits with it,” said Alberto Fernández.

Despite the important reserves that Argentina has, the South American country has found a limitation for the extraction of gas in the limited transport capacity of its gas pipeline network, which has reached its maximum use.

This has forced Argentina to expensive imports of LNG, whose international prices have skyrocketed since the war in Ukraine, causing a large deficit in the accounts of the South American country.

Argentina currently imports 35 LNG ships a year, but when the LNG plant reaches full capacity, the country will be able to export 460 ships a year.

While advancing in the incipient process to expand its gas pipeline network, the LNG plant project adds incentives to reinvigorate investments in Vaca Muerta, whose massive development is still at 12% and has achieved in August a new record level of exercise.

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YPF and Petronas have been partners since 2014 in the La Amarga Chica area, the second largest unconventional oil producing field in Vaca Muerta.

In addition to the LNG agreement, YPF and Petronas signed a memorandum of understanding on Thursday to continue collaboration in Argentina in other areas, such as oil production, petrochemicals and clean energy solutions.

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