YPF and Petronas announce joint LNG partnership in Patagonia, Argentina — MercoPress

YPF and Petronas announce joint LNG partnership in Patagonia, Argentina

Rio Negro’s geographical location has many advantages over Bahia Blanca.

Argentine state oil company YPF and its Malaysian subsidiary Petronas will invest more than $30 billion to build a liquefied natural gas (LNG) plant in Patagonia’s Rio Negro province, it has been announced, ending speculation that the plant would or should be located in the Bahia Blanca region of Buenos Aires province.

The consortium will build a plant in Sierra Grande, Rio Negro Province, becoming the world’s fifth largest liquefied natural gas producer. The YPF board of directors unanimously selected Sierra Grande after a comprehensive technical and economic evaluation, which found that the site in Rio Negro Province had significant advantages over the original Bahia Blanca option.

One factor is that shorter pipelines are needed to deliver gas from Vaca Muerta, which means lower costs and greater efficiency. Also, the greater depth of the seawater in the Sierra Grande area minimizes the need for dredging to obtain adequate draft.

Experts also took into account the expansion of land area and the reduction of interference with other social and economic activities in the region. In addition, the province of Rio Negro offers the best conditions for the development of this project, aimed at boosting the Patagonian economy.

In a statement, the two companies stressed that the Río Negro “represents a better economic rationale for the project, even if Buenos Aires offers equivalent tax incentives”, according to a report by the international consulting firm Arthur D. Little. The report also explains that the Río Negro could develop a deepwater port, allowing access for large “supertankers” and reducing transportation costs. In short, the Sierra Grande region “seems to be the best option”, the document continues.

YPF and Petronas will seek to attract other oil companies involved in natural gas production in the country (PAE, Total Austral, Tecpetrol, Pampa Energía, CGC and Wintershall Dea, among others) to join a large-scale export partnership. Meetings with potential buyers have reportedly already been arranged.

YPF’s relationship with Petronas dates back to 2014, when the two parties developed the La Amarga Chica unconventional block in Vaca Muerta. The partnership, with a joint investment of USD 1.5 billion, is part of YPF’s ambitious plan to invest USD 10 billion over the next decade.

Along with the reopening of the Port of Punta Colorada, the Sierra Grande LNG plant is expected to create a significant number of direct and indirect jobs, thereby attracting other industries to locate in the region.