Page 4 - GLNG Week 35

GLNG COMMENTARY GLNG
Argentina pushes on with LNG plan amid political upheaval
Argentina’s YPF continues to pursue a plan for a major LNG export project, but political uncertainty in the country will likely slow progress, writes Anna Kachkova
POLICY
WHAT:
YPF is not letting political upheaval stop it from pursuing its LNG export plans.
WHY:
The rm is counting
on Argentina’s location and abundance of gas to counter the impact of political uncertainty.
WHAT NEXT:
Argentine President Mauricio Macri appears unlikely to win his re- election bid.
POLITICAL turmoil in Argentina is not stop- ping state-owned YPF from pushing on with a plan to build a $5bn LNG export terminal. But the company’s e orts come amid warnings over the country’s export potential, and new uncer- tainty over its future investment climate as a presidential election approaches.
Last month, Argentine President Mauricio Macri lost a primary vote by a landslide, attract- ing 33.5% of the vote compared with 49.7% for opposition candidate Alberto Fernandez. e result crashed the country’s currency, the peso, exacerbating an already escalating nan- cial crisis. In the rst week of September, Macri imposed currency controls, marking a dramatic policy reversal from the start of his presidency, when he set about dismantling them. e move comes as the pro-market president battles for re-election, or at least to survive to the end of his term in o ce.
In the meantime, YPF has been in discussions with domestic and international companies over designs for an LNG export facility in Argentina. But potential investors may take a dramatically di erent view of Argentina’s future investment climate following Macri’s defeat in the primary, given the increased possibility of a more protec- tionist government taking power.
Nonetheless, YPF has tried to remain upbeat about Argentina’s prospects for LNG exports.
“We can’t put the cart before the horse by distracting ourselves with current events,” YPF’s executive vice-president for natural gas and power, Marcos Browne, was quoted by Bloomb- erg as saying. “ is is the direction we need to move in.”
Investors may disagree, however, depending on how the election plays out and what happens to Argentina’s economic situation. A change in government could also mean changes to YPF’s management.
LNG push
Drilling in the Vaca Muerta shale play has spurred Argentina to develop LNG export capacity as production from the formation has risen. e country is preparing to start shipping cargoes from the Tango oating LNG (FLNG)
facility at the end of October. e project was designed for quick start-up, with the contract for it signed in November 2018, illustrating the rush to capitalise on abundant natural gas in the Vaca Muerta.
Once it comes online, tankers are anticipated to ship cargoes from Tango FLNG roughly every 40 days until the start of the Argentine winter in May 2020. Over the winter, increased demand at home is expected to result in the gas being redi- rected for use on the domestic market.
However, Tango FLNG only has the capac- ity to produce around 500,000 tonnes per year (tpy) of LNG. And while the facility o ers sea- sonal exibility to Asian utilities, Argentina’s oil industry believes that bigger LNG facilities need to be built in the country to secure major buyers in Asia, and spur demand for output from the Vaca Muerta.
Browne has said that options for a new export terminal include anchoring several oating liquefaction units similar to Tango in a row. Such a design would be similar to that of Golar LNG’s project in Cameroon. But it is not yet clear whether a new terminal would be located onshore or o shore, nor has a location been decided on. e plans for the terminal are anticipated to take about two years to develop, and Argentina’s political situation could be dra- matically di erent by then.
Warnings
On top of the uncertainty surrounding expec- tations for Argentina’s economic and political
Argentine President Mauricio Macri’s bid for re-election looks shaky after he lost a primary vote by a landslide.
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w w w . N E W S B A S E . c o m Week 35
05•September•2019