Page 5 - LatAmOil Week 35 2019

LatAmOil COMMENTARY LatAmOil
 The company said its price freeze would apply to all contracts that provided for payment in US dollars, including contracts with oilfield services providers and foreign equipment suppliers, it said. As a result, it added, the new policy will affect the company’s entire supply chain.
YPF explained the move by saying it was trying to ensure its ability to fulfil supply con- tracts and maintain employment and produc- tion at current levels while also compensating for the stagnation in world crude oil prices and reducing exposure to exchange rate fluctuations. Making these contracts less vulnerable to short- term market shifts will give the company a better chance of achieving these goals and preventing the emergence of a gap between revenues and expenditures, it said.
Flexibility yes, devaluation no
The company also stated that it was willing to revise the terms of existing contracts to reflect the consequences of the price freeze, but did not elaborate.
Additionally, it declared that its new policy did not represent a move towards the devalua- tion of the Argentinian peso. Rather, it said, the
freeze simply allows YPF to base contractual payments on an exchange rate of ARS45.19 per $1, as specified in the emergency measure prom- ulgated by the government in August.
Furthermore, the company emphasised the temporary nature of the freeze, saying it would only keep the policy in place long enough to ensure that it could mitigate losses stemming from recent events. Daniel Gonzalez, the com- pany’s CEO, said recently that he expected YPF to sustain up to $120mn per month in losses as a result of the state-imposed restrictions on gaso- line and diesel prices.
Both the Energy Secretariat and YPF are tak- ing action in a bid to avoid disrupting operations in the upstream, midstream and downstream section of the oil industry. Nevertheless, their new policies are not likely to make the Argen- tinian economy look any steadier in the near term. Instead, they may fuel concerns about the possibility of a sharp uptick in crude oil and motor fuel prices once both sets of freezes are lifted. As such, they will contribute to the tumult that is likely to precede Argentina’s next presi- dential election, which is due to take place next month. ™
YPF says it will “
only keep the price freeze in place long enough to mitigate losses stemming from recent events
MEXICO
Stabilis mulls Monterrey as site for small-scale Mexican LNG plant
HOUSTON-BASED Stabilis Energy has said it is considering the Mexican city of Monterrey as a potential site for its first LNG project in the Central American country.
Stabilis struck two deals last week that would extend the company’s reach south, as well as laying the groundwork for building a lique- faction plant in Mexico. The small-scale plant would receive feedstock gas from the Eagle Ford shale formation in Texas, and would use tanker trucks to ship the liquefied gas on to customers in remote sites.
The move comes as the use of tanker trucks for hauling LNG to customers in Mexico is already growing in popularity. Indeed, Stabilis opened a liquefaction plant in the South Texas town of George West in 2015. The $55mn plant has the capacity to produce 120,000 gallons (454,249 litres) per day of LNG. It was initially focused on supplying LNG to power generators at remote drilling sites and sand mines in Texas, but has since started tapping demand in Mexico, where it has acquired a number of industrial and agricultural customers.
Over the past 18 months, Mexican company Enestas has being buying LNG from the Stabi- lis plant. Enestas delivered around 4mn gallons (15mn litres) of US LNG to its customers in Mexico in 2018, and anticipates selling 10mn gallons (38mn litres) of the fuel this year.
Now Stabilis is expanding its Mexican reach.
The first deal struck last week saw Stabilis agree to buy Texas-based LNG marketing firm Diversenergy, which has several customers in Mexico. The second deal is a joint venture between Stabilis and CryoMex, a subsidiary of Monterrey industrial conglomerate Grupo CLISA.
“We see this as a huge opportunity for LNG basedonthemarketfundamentalsdownthere,” Stabilis’ CEO, Jim Reddinger, was reported by the Houston Chronicle as saying. “We’re excited to have an in-country presence for both opera- tions and investment.”
While the financial terms of the deals were not disclosed, Reddinger described the agree- ments as forming part of the company’s strategic push into Mexico. Stabilis estimates that over the next five years, Mexican industrial and agricul- tural companies will consume up to 3mn gallons (11mn litres) per day of LNG, or roughly 1bn gallons (4bn litres) per year. Having struck the deals, the company is seeking to supply 900,000 gallons (3.4mn litres) per day of this demand, and has said that meeting this target may require multiple liquefaction facilities.
“The fundamental fact is that Mexico is a lot less pipeline-rich than the United States, espe- cially when it comes to last-mile distribution pipeline,” Reddinger said.
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