Page 5 - LatAmOil Week 35 2022

LatAmOil COMMENTARY LatAmOil

To date, though, it has not realised its full poten- installation of marine terminals that can load or
tial. Although major international oil companies unload ships that handle these materials.
(IOCs), including but not limited to Equinor González indicated that YPF had been ready
(Norway) and TotalEnergies (France), are to make a case for its projects, as it saw Rio Negro
working in Vaca Muerta, the shale formation’s as its best alternative for sending more oil to
production rates are still relatively low. They are market. “It was determined that Punta Colorada
rising, but they have yet to climb quickly enough offers the best conditions for this purpose due
to allow the country to shed its dependence on to the depths of the coastal waters, which allow
imported crude and petroleum products – and the operation of deep-draft vessels, as well as the
this continued dependence has proved quite availability of land for complementary facilities,”
burdensome this year, due to the extreme price he said.
increases and supply disruptions that have fol- The company appears to have made a con-
lowed Russia’s invasion of Ukraine. vincing argument. Ámbito noted that proposals
YPF wants to change all of that – and it for amending Law 3,308 had passed in the first
knows that part of the obstacle to raising output reading in the provincial legislature and would
has been that Argentina does not possess the now be opened up for public discussion until
infrastructure to move large new production the legislators convened again, 15 days later.
streams to market. As such, González said, the Sebastián Caldiero, a member of the majority
NOC has decided to build the new link. Exist- Juntos Somos Río Negro faction, said he hoped
ing alternatives for bringing Vaca Muerta oil the second vote would have similar results.
to market – including domestic pipelines, as The province is facing the challenge of bal-
well as the 225,000 bpd Oleoductos del Valle ancing a law that is designed to protect the public
(Oldelval) system, which runs from the shale interest with the chance to become “the logistics
formation to Puerto Rosales – are simply not centre” for the export of oil from Vaca Muerta to
sufficient to meet the country’s long-term needs, the Atlantic market, he remarked. “We under-
he explained. stand the opportunity that is being created for
“It is essential to look for new alternatives Rio Negro, especially in the context of the need
for export [that are] complementary to the for the country to achieve self-sufficiency and
commissioning, scheduled for next year, of the become an exporter of hydrocarbons,” he said.
Trans-Andean Oil Pipeline after two decades
of paralysis,” he added. He was referring to the The bigger problem
NOC’s plans to resume shipments through Assuming that the final vote goes in YPF’s
cross-border pipeline that runs from Neuquén favour, then, Argentina will be one step closer
Province to the Chilean port of Concepcion. The to establishing a new export outlet for oil from
link has been idle since 2006. Vaca Muerta – and, therefore, a step closer to
According to Ámbito, YPF’s new pipeline making the basin more attractive to potential Argentina will
from Vaca Muerta to Punta Colorada de Sierra exporters who might be able to ramp oil output need more than
Grande will have a throughput capacity of up in satisfyingly rapid fashion.
372,000 bpd. It will be about 700 km long, and But the country will need more than YPF’s YPF’s terminal
most of the route, or about 635 km, will run terminal to achieve its goals. Frankly, it will also
through Rio Negro Province. need more than YPF’s terminal and pipeline and pipeline to
The project is also expected to have economic combined. Argentina is not just short on export
benefits, as it will directly create about 1,000 new capacity; it is also short on the credibility needed achieve its goals
jobs during the construction phase, the daily to execute these projects without a hitch.
said. It may also lead to the creation of around Buenos Aires – and, by extension, YPF – is
3,000 more jobs indirectly, along with contracts likely to experience at least some difficulty find-
for suppliers in multiple sectors of the economy. ing the billions in dollars in loans needed to
finance these projects, given that its sovereign
Changing laws debt load has been growing at the rate of around
YPF has had to do a certain amount of foot- $3bn per month over the last year. Likewise, it
work to make this project happen. The Ámbito may have at least some difficulty convincing
report noted that González’s meeting with local IOCs to make the kind of large-scale commit-
officials had taken place about a week after Rio ments needed to ramp up production at the
Negro’s legislature took steps to start revising the desired rate.
province’s laws for the purpose of supporting These difficulties are, of course, the reason
such an undertaking. why Argentina’s President Alberto Fernan-
Under the current legal regime – and more dez recently granted Sergio Massa, his newly
specifically, Law 3,308, which has been in force appointed economy minister, extra authority in
since 1995 – hydrocarbon exploration and pro- a bid to stave off an economic and fiscal crisis.
duction operations are prohibited throughout And if the country does not succeed in overcom-
Rio Negro’s offshore zone, including the San ing these hurdles, plans for building the pipeline
Matías Gulf as well as the ocean waters beyond and terminal may not be enough to tip the scale
it. The relevant laws also include specific legal – especially now that global crude prices are
restrictions on the construction and/or installa- trending downward and making higher-risk
tion of pipelines for the transportation of crude and higher-cost projects less attractive. As such,
oil, natural gas or any of their derivatives, and YPF should keep a close eye on government pol-
there are also limits on the construction and/or icy. ™

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