US financial assistance proposal could fuel Argentina's oil sector growth: YPF

A US plan announced Oct. 15 to create a potential $20 billion facility with private investors to invest in Argentina's sovereign debt is expected to fuel investment in the oil and natural gas sector. This will help Latin America's third-largest economy achieve the long-sought stability that businesses need to make long-term decisions, YPF CEO Horacio Marín said.

"This is a structural change that is very good for the business environment," Marín said late Oct. 15 at a business conference in Mar del Plata, Argentina hosted by IDEA, a business association.

The funding, if it appears, coupled with the US' recently announced $20 billion currency swap line with Argentina will help "strengthen" Argentina's economic program, which he described as "excellent" and good for business.

"This provides the foundations for growth," Marín said of the US financial lifeline.

US Treasury Secretary Scott Bessent announced the proposed new facility for Argentina on Oct. 15, saying that it would help Argentina keep on top of its debt payments.

Argentina faces nearly $19 billion in debt payments next year, about half of which are on international bonds and more for multilateral lenders like the International Monetary Fund. The nation's capacity to pay its debts is a major concern for investors — and companies doing business in the country, including oil producers — because of a long history of nine sovereign defaults. These nonpayments have often brought economic crises that have pushed up the cost of doing business in the country, in particular for financing projects, leading to slower investment in oil and natural gas activities — and a decline in production.

Bessent's announcement was made a day after Argentinian President Javier Milei met with his US counterpart, Donald Trump, in the White House. Trump said at the time that he wanted to help Argentina to grow, including with the financing program.

Marín said this agreement between the two countries "will help the entire business community and YPF's goals in particular."

This will be in the case of financing in particular, he added.

YPF is borrowing money for projects at 8.5%, more than double the 10-year US Treasury yield of 4%. But with the US agreement, this could come down, he said.

"When there are clear signs of financial and political support, projects move forward," the executive added. "This is no longer noise."

Boosting output for export

Marín, who took the reins of state-run YPF at the end of 2023, has been spearheading a plan to ramp up production with a focus on the huge Vaca Muerta shale play and export facilities. The company is working with other producers to build a 550,000 b/d oil export pipeline and terminal, as well as up to 30 million mt/year in LNG export capacity.

As part of this push, YPF has sold off most of its conventional fields to focus on Vaca Muerta, where it has increased oil production to 190,000 b/d from 90,000 b/d over the past two years, keeping its overall output steady at 250,000 b/d, Marín said at the event.

YPF has said it aims to reach 470,000 b/d of shale oil output by 2030, while also growing in shale gas to feed the LNG terminal.

This will require an increase in its drilling rig count, now at a dozen. Marín said it will reach 19 rigs next year and 31 to develop gas for the LNG export facilities and then 40 to meet its export targets, all before 2031.

Supplying the gas for export will require the drilling of 800 wells, up from the 150 that the company has in production right now, he added.

YPF is working on a deal with Italy's Eni on exporting LNG, which Marín said is moving forward and will involve a partnership to develop wet gas blocks in Vaca Muerta to supply the floating export terminals.