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Argentina's YPF to invest up to $7 billion on infrastructure to boost oil exports


Company will handle 40% of the spending

One project will export crude from a new terminal

YPF wants to work fast on increasing shale oil exports

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  • Charles Newbery
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  • James Bambino
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Argentina's state-run energy company YPF plans to invest between $6 billion-$7 billion with partners to build pipelines and other infrastructure to boost oil exports from the Vaca Muerta shale play, with a focus on supplying a proposed terminal in the south that can load very large crude carriers, CEO Pablo Iuliano said April 20.

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"We need to rapidly monetize our oil resources," he said at the Experiencia IDEA Energía business conference in Neuquén, Argentina.

YPF, the biggest oil producer in the country, will put in 40% of this investment into taking on the next big challenge for Vaca Muerta: getting the oil out and to buyers.

"We have a beautiful problem, which we are resolving," he said of the bottlenecks in transportation capacity.

A handful of projects are underway to build pipelines. Oleoductos del Valle, a pipeline operator part-owned by YPF, is doubling its takeaway capacity to 452,800 b/d by the end of 2024 and considering expanding that further. YPF is poised to launch operations of a 115,000 b/d cross-border pipeline to Chile, with a 160,000 b/d feeder pipeline in Vaca Muerta. YPF is also in the preliminary stages on a $1.2 billion project to build a 380,000 b/d pipeline and port facilities on the Atlantic to increase shale oil exports.

"We are de-bottlenecking the system," Iuliano said, adding that other companies are carrying out additional investments in transport. "We can quickly begin to export oil."

Platts, part of S&P Global Commodity Insights, assessed Argentina's Medanito crude at the Latin American Dated Brent Strip minus $6.58/b April 19. The grade has held a steady, near-$6/b discount to Dated Brent since September, S&P Global data shows.

YPF has focused for many years on supplying the domestic market, given that it is the biggest refiner in the country.

But with plans to double its own crude production to 450,000 b/d by 2027, the company will soon be running a surplus over its 320,000 b/d of installed refining capacity so that it can step up exports. YPF was producing 226,000 b/d of crude in 2022, according to company data.

Iuliano said Argentina's crude production, led by Vaca Muerta, is on track to reach 1.2 million b/d in the next few years, up from 627,000 b/d in February of this year, which is already more than the 550,000 b/d of average demand.

Atlantic pipeline project

Iuliano said the most competitive transport project in its portfolio is what the company has dubbed Vaca Muerta Sur, the $1.2 billion investment to build a 380,000 b/d pipeline and port facilities on the Atlantic.

This will allow the company to load crude on VLCCs, which can transport "practically double" that of Suezmax and Panamax carriers, he said.

"This dramatically cuts the costs of logistics and transport," Iuliano said.

Ample export opportunities

At the event, Bob Dudley, chairman of the Oil and Gas Climate Initiative and a former president and CEO of BP, said Argentina has plentiful opportunities to export given its access to both the Atlantic and Pacific oceans.

"Argentina has got some geographical advantages," he said. "It can take oil or gas and take it out into the Atlantic basins, and it can go anywhere."

The country also has access via Chile or around Cape Horn to the Pacific basins, where there is potential for increasing oil exports given the growing tensions between China and the West, Dudley added.

"China, Korea, Japan and all those countries would really be interested in products," he said. "Putting oil out into the Pacific has a lot of advantages. This is a real blessing for Argentina."