Argentina's YPF and Petronas Sign An Agreement for Key Gas Pipeline and LNG Plant

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Argentina's YPF and Petronas Sign An Agreement for Key Gas Pipeline and LNG Plant

Thu, 09/08/2022 - 16:20
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YPF sign at a gas station (© Shutterstock/Instrumenta)
YPF sign at a gas station (© Shutterstock/Instrumenta)

Argentina's state-owned oil company YPF on September 1, 2022, signed a deal with Malaysia's counterpart, Petronas, to build a gas pipeline to transport fuel and a massive liquefied natural gas (LNG) plant.

During the preliminary agreement signing ceremony for the two energy giants in  Buenos Aires, President Alberto Fernandez applauded the initiative with YPF's chief executive, Pablo Gonzalez, and Tengku Muhammad Taufik, the CEO of Petronas.

The project agreement comes when the demand for fossil fuels skyrockets globally following the ongoing Russian invasion of Ukraine, which has had a dilapidated impact on the world energy markets, spurring growing interest in LNG production and pipeline development as many European countries that for years have relied on the Russian natural energy rush for alternative supplies.

The Petronas and YPF agreement marks a new phase for the long-established relationship between the two countries that seek to leverage the leadership advantages the two countries offer.

The highly anticipated project will cost approximately $10 billion in the initial investment, which the two firms said will generate about 5 million tonnes of liquefied natural gas during the first years of operation. However, the two partners did not specify when the plant was expected to go online.

In a statement, YPF and Petronas said the project would take at least a decade to complete, after which it's expected to generate and export around 25 million tonnes of LNG annually.

"We're meeting the objective we set out: to not leave Vaca Muerta's gas in the ground, extract it as fast as we can, use what we need, and then export and collect profits," Alberto Fernandez pointed out, adding that the primary export source will be Argentina's massive Vaca Muerta shale.

Even though the YPF-Petronas LNG project will take years, it promises to deliver high dollar earnings, especially to the financially struggling South America County. Consequently, increased gas production from Vaca Muerta is expected to reduce reliance on expensive gas imports over the long term.

The YPF and Petronas LNG agreement showcases a continued partnership between the two energy-rich economies. The two companies have been partners since 2014 during the formation of the La Amarga Chica field in Vaca Muerta, which currently produces over 40,000 barrels of oil daily.

In 2018, the YPF and the Petronas Group launched a $2.3 billion investment to build a shale oil block in Vaca Muerta, which so far is one of the world's largest gas and oil shale reserves.

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