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Argentina seeks to build bigger petchem hub as gas output rises

Houston — Argentina's government wants to create a bigger hub for exporting petrochemicals, as production of feedstock natural gas rises with the incipient development of large unconventional plays, Energy Minister Juan Jose Aranguren said September 13.

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The location of the export hub would be Bahia Blanca in the province of Buenos Aires. It is already a center of production for polymers such as polyethylene by companies such as Dow Chemical, and one of the biggest hubs in Latin America.

"Bahia Blanca could be a world-class hub for petrochemical production," Aranguren said at the Argentina Investment and Business Forum in Buenos Aires. "For this to happen, all we need is the gas."

Argentina's gas production has been on the rise since 2015 after a decade of decline. Output was 122.2 million cu m/d in the first half of 2016, up 7.5% from a low of 113.7 million cu m/d in 2014, led by the development of shale and tight plays like Vaca Muerta.

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A continued increase would provide feedstock to encourage the expansion of existing petrochemical plants and the construction of new ones, Aranguren said.

"We will certainly be able to export the petrochemicals that Europe and Brazil need," Aranguren said.

For its part, Dow Chemical is planning to expand its capacity for polyethylene and related products in Bahia Blanca, thanks to the increase in gas supplies, including through its own investment in the upstream sector.

The company has been working with Argentina's state-run energy company YPF since 2013 to develop shale gas from the giant Vaca Muerta play in the southwestern Neuquen Basin. They agreed in December to invest $500 million in 2016 and 2017 to put the El Orejano block into mass development, after spending $350 million on exploration and a production pilot.

The block, operated by YPF, has seen production double since December to 1.5 million cu m/d, said Gaston Remy, CEO of Dow Argentina.

He said production is due to reach 2.5 million cu m/d in the next year and 4 million cu m/d in the next two to three years.

With more gas, there "is a great opportunity" for the country to expand petrochemical production, Remy said.

YPF and Dow have said they plan to invest a total of $2.5 billion on developing El Orejano, including by drilling more than 180 wells and installing associated infrastructure such as treatment plants and pipelines.

--Charles Newbery, newsdesk@spglobal.com
--Edited by Lisa Miller, lisa.miller@spglobal.com