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The president and CEO of YPF, Horacio Marín, does not lose optimism about achieving the largest infrastructure project in the country’s history: the construction of a liquefaction plant that allows the export of liquefied natural gas (LNG). However, he once again compromised the viability of the project until Congress approves the large investment incentive scheme (RIGI).
“Without RIGI there is no LNG, because this project is unfinanceable,” he says, bluntly, at the S&P Global Commodity Insights Argentina Energy Forum, an event that brings together international analysts.
If the plans that Marín has in mind come to fruition, The peak production of the gas project will be in 2031. By that point, he explained that investments of US$50,000 million will have been demanded. “If one is not profitable at low prices [de gas]there is no chance that the project will be financeable. The law [Bases] It will allow us to be profitable to operate with low prices. This is how we are going to get the capital to be able to develop the project,” he said.
The number one oil company with state control added that “the window of opportunity is now” and that “perhaps in two years there will no longer be the possibility” of developing the project. “Companies and YPF have to have the tool of the law to market and seek investments. It is competitive at low prices with RIGI. We have to achieve it, it would be a big missed opportunity if it doesn’t work out. “Argentina could become the fifth largest LNG exporter in the world,” Marin added.
One of the main criticisms of the bill is that does not require companies to use local suppliers. In this regard, Marín, who was previously in charge of the Fortín de Piedra project with the company Tecpetrol, said that it is not necessary to establish it by law, since it will naturally occur.
”When we developed Fortín de Piedra, more than 1,000 SMEs worked on the project and there was no more labor available in Neuquén. In construction we were not able to hire people according to the need we had. If there was a delay, it was due to a lack of labor to hire.. Making LNG is like building eight [proyectos] of Fortín de Piedra simultaneously. The most difficult thing is finding SMEs and labor. It is not that Argentine SMEs are going to lose. We couldn’t cope at the time,” he said.
In this context, Carlos Pascual, vice president for Global Energy and International Affairs at S&P Global Commodity, commented that last week he was in Brazil when the problem of gas shortage occurred in the country, which left more than 300 industries and CNG stations without supply. “In Brazil everyone was talking about it. Will Argentina be able to be a gas supplier to the region?”he asked Marín.
Without going into political details, the head of YPF answered that Argentina has enough gas to supply the region, in addition to becoming a net exporter of LNG.
When making a projection of how he sees the oil company in the next four years, Marín pointed out that if “the value of the share is above US$60, we will have done an excellent job together”. The stock is currently trading at US$20 on the New York Stock Exchange.
“If it’s US$50 we also get drunk. But let’s hope that YPF is a company that everyone talks about for its productivity and efficiency. I’m not talking about professionalism, because he already has that,” he concluded.
Before Marín assumed the presidency of YPF, the oil company had already closed an agreement to evaluate the possibility of exporting LNG together with the Malaysian state company, Petronas. In November 2022, the then YPF executives, Pablo González and Pablo Iulianothey promised the Malaysian managers that the law creating the LNG regime would come out the following year. The project was half approved by the Deputies in October 2023, but was left in limbo in the Senate.
Now, the promise of the new YPF managers is the approval of the RIGI, and the entire industry as a whole also came out to explain the importance that the regulations would have in the sector.
“To build the LNG plant, at least US$25 billion of investments are needed. For this, long-term conditions are required. The RIGI helps with that and with competitiveness, because we have to buy from the United States and Canada. We have to go out and look for financing and for that there is not enough, the account is fair. Even though we have a magnificent resource, we are not even going to reach Brazil,” said Rodolfo Freyre, vice president of Gas, Energy and Business Development at Pan American Energy (PAE).
Gabriela Aguilar, CEO of Excelerate, the company in charge of the regasification vessel located in Escobar, said that the great challenge for the country and the industry is to “lower the Argentine risk.” And she explained: “To get the industry up and running we need the political community to understand that long-term projects are being carried out that transcend political mandates.. In addition, we have to assure the world that we can export 365 days a year and that we will not cut shipments when there are not enough import LNG shipments.”
Catherine Remy, CEO of TotalEnergies Argentina, agreed in the same sense. ”Country risk must be lowered to lower financing costs and allow developments not only for gas, but also for renewable projects. Thus, Argentina will be able to play a very important role in the energy transition chain“, he pointed.
Ricardo Ferreiro, president of E&P at Tecpetrol, said that after reaching a peak production of 24 million cubic meters per day, the company is evaluating investing in two oil projects in Vaca Muerta, where they could produce 100,000 barrels per day. . For these projects to come to light, he pointed out several challenges ahead, in addition to the need for the RIGI to be approved.
”We have challenges in the evacuation infrastructure and another very important one is the availability of human resources. We are working on training scholarship plans with universities, governments and unions to train qualified resources. We also have difficulties in supply chain [la cadena de suministros]in the import market, although it is normalizing. And we also have the challenge of access to international capital,” he listed.
