LNG

Argentina purchased 28 liquefied natural gas cargoes for the Southern Hemisphere winter at average prices of $2.87 million British thermal units as natural gas production fell in the first half of 2020 amid long-term plans to start its own LNG exports from the Vaca Muerta Shale.

Argentina’s state-owned Integración Energética Argentina (Ieasa) purchased the LNG shipments to cover around 25 percent of the country’s natural gas needs during the winter season.

The Argentine Energy Institute (IAE) said in its latest report that natural gas production dropped by 9.2 percent year-on-year, or 4.39 billion cubic feet per day, to 124.4 million cubic metres per day.

Analysts said that movement restrictions in place because of Covid-19 led to the fall in output.

The IAE report said conventional gas production, which accounted for 57 percent of the overall fall, decreased by 10.6 percent in May while unconventional output from the Vaca Muerta Shale in the western Neuquén province fell by 7.2 percent.

Argentine natural gas output has been falling since March 2020 and in April was down by 11.3 percent from the same month in 2019 to 116.7 million cubic metres per day

Oil and gas services companies say that since the start of June there has been an increase in activity, particularly in the Vaca Muerta.

There were 196 hydraulic fracturing stages completed in the Vaca Muerta in June, still less than one-third of 2019 peak activity, compared with just 28 in May and none recorded in April, according to data compiled by Houston-based services company NCS Multistage.

The Argentine natural gas market is also going through a transition, specifically with regards to price formation.

While productivity had improved before the Covid-19 lockdown as a result of increased fracking stages and longer laterals, production costs at the Vaca Muerta are still too high for international markets.

The Argentine government has also been taking measure to stimulate the oil and gas industry, now considered vital for the South American nation’s economic future, by bringing in a $45 per barrel oil price floor for producers to encourage exploration and production.

Energy market reforms include a natural gas pricing structure with a benchmark start being considered of around $3.50 per MMBtu.

The IAE report added that the state-run Argentine Electricity Market Management Company (Cammesa), which purchases natural gas and ensures power supplies, paid subsidies in June amounting to about $2 billion.

The Vaca Muerta has attracted investment partners such as international majors ExxonMobil Corp., Chevron Corp. and Royal Dutch Shell as well as Total, Norwegian company Equinor and Qatar Petroleum.

They are being supported by Argentina’s state-owned energy company Yacimientos Petroleiferos Fiscales (YPF) as a full participant in properties.

Equinor, for example, is partnered with Shell and at the start of 2020 they expanded their acreage. They completed the joint acquisition of the 49 percent interest held by Schlumberger in the Bandurria Sur onshore block, with each paying $177.5M for their 24.5 percent stakes in 56,000 gross acres in the central area of the Vaca Muerta.

YPF is the operator of this project with a 51 percent interest and the block was in the late pilot phase of development before the March lockdown and has production estimates of around 10,000 barrels of oil equivalent per day.

The Argentine company said in a recent presentation that shale oil and gas production would soon account for 20 percent of its overall output.

YPF added that its average first-quarter 2020 natural gas price realizations were $2.80 per MMBtu, down from $3.70 per MMBtu in the same quarter of 2019 and from $4.80 per MMBtu in the first three months of 2018.

Argentine President Alberto Fernandez said he would send a bill to Congress to attract investment for the production of conventional and unconventional hydrocarbons in the world-class Vaca Muerta shale formation.

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.

Argentine oil and gas producer, Yacimientos Petroleiferos Fiscales (YPF), said it was loading its first shipment of liquefied natural gas for export at the “Tango FLNG” facility deployed at the port of Bahia Blanca.

Argentina is offering its first liquefied natural gas cargo produced by a floating liquefaction unit deployed at the port of Bahia Blanca as it aims to end its import requirements and become a future large-scale exporter of LNG made from the huge Vaca Muerta shale-gas resources.

Argentina, the world’s second-largest holder of shale-gas resources after the US and currently an LNG importer, expects shale gas and oil production to grow 35 percent in 2018 as costs in its prolific and extensive Vaca Muerta Shale Basin continue to drop.

Argentina's national energy company, Yacimientos Petroleiferos Fiscales (YPF), said its Chief Executive Ricardo Darre had resigned for personal reasons and has been replaced by a six-man executive committee as it embarks on the development of its huge shale-gas reserves to replace LNG imports.

May 15 (LNGJ) - The Argentine state-run energy company, Yacimientos Petroleiferos Fiscales (YPF), said it expected a drop in natural gas output this year due to labour problems and flooding in Chubut province in Patagonia. “Clearly 2017 is not going to be a strong year in terms of hydrocarbons production,” said YPF. “We are targeting a 3 percent decline,” it added. The Argentine oil and gas producer is seeking partners to develop some of the world's largest shale reserves in the south of the country. Argentina’s LNG imports in 2016 amounted to 3.42 million tonnes, the second-largest in the region after Mexico with 4.10MT.  Argentina believes it is still on track to cease LNG imports as substantial shale-gas supplies from its estimated 308 trillion cubic feet of recoverable resources begin to flow by 2022.