LNG

Argentine oil and gas producer, Yacimientos Petroleiferos Fiscales (YPF), has sold overseas bonds for the first time in more than a year amid a slow return of investor confidence as the company starts small-scale LNG exports and the nation’s huge Vaca Muerta shale basin continues to be developed.

YPF issued $500 million of 10-year, dollar-denominated notes to yield 8.75 percent. The sale on June 24 was managed by the US Citigroup, the UK’s HSBC Holdings and Itau Unibanco Holdings SA of Brazil.

Bankers said that proceeds from the sale would go towards working capital and refinancing existing debt.

State-owned YPF is traditionally among the country’s biggest corporate borrowers and it hadn’t issued bonds recently in international markets as an economic slowdown and a currency crisis affected investor confidence.

YPF is the largest investor in the Vaca Muerta shale basin of onshore oil and gas reserves in the northwest Argentine province of Neuquen.

Covering an area the size of a small European country, it has become one of the world’s leading shale basins and has attracted international companies such as US majors ExxonMobil and Chevron Corp., Qatar Petroleum, French major Total and Equinor of Norway.

Argentina also loaded its first shipment of LNG on June 3 for export at the “Tango FLNG” facility deployed at the Argentine port of Bahia Blanca.

YPF said the shipment included 30,000 cubic metres of natural gas from the Vaca Muerta shale.

An LNG carrier, the Malta-registered and Japanese-built “Fuji LNG”, lifted the cargo at Bahia Blanca after arriving on June 2 and then proceeded to Cheniere Energy’s Sabine Pass plant in Louisiana, arriving on June 24, according to shipping data.

The “Tango FLNG” plant is chartered under a 10-year agreement from Belgian shipping company Exmar.

The vessel is the former floating liquefaction unit, “Caribbean FLNG”, constructed for a cancelled venture in the South American state of Colombia and renamed before being sent to Argentina.

YPF did not at first specify the destination of the shipment, though said it was being helped by the marketing arm of US exporter Cheniere.

Argentina’s medium-term aim in the LNG sector is to halt its own LNG imports, which will number at least nine large-scale cargoes or more for the Southern Hemisphere winter, and to become an exporter.

Growing natural gas production from the Vaca Muerta shale will eventually meet all of the nation’s energy requirements and leave a surplus for export.

However, production costs for shale will have to be reduced to make exports economic and huge investment is needed in infrastructure to handle large-scale gas volumes and onshore liquefaction, though the floating LNG project is viewed as a good introduction to the export market for YPF.

The “Tango FLNG” plant will produce up to eight cargoes per annum from the Vaca Muerta supplies.

The shale-gas production has also enabled the resumption of pipeline supplies to neighbouring Chile.

ExxonMobil and Qatar Petroleum are proceeding with a long-term upstream development in Argentina’s Vaca Muerta shale play with plans for 90 wells with a central production facility and pipelines.