Petronas spreads its LNG wings overseas

Tie-up with YPF could see Argentina exports returning this decade

Malaysia’s energy giant Petronas is teaming up with Argentine counterpart YPF to pursue a grassroots liquefied natural gas export project in the South American nation.

If the multi-billion dollar Atlantic coast project leaves the drawing board, initial volumes of 5 million tonnes per annum are envisaged with the project ultimately being scaled up to 25 million tpa of LNG being produced from Argentina’s Vaca Muerta shale reserves.

“The final investment decision… will be undertaken after diligent technical and commercial assessment has been conducted, backed by conducive fiscal terms, legislation and policies,” said Petronas.

Petronas and YPF have signed a memorandum of understanding to evaluate the feasibility of constructing the LNG export project, which might require other partners to come on board, Bloomberg reported YPF chairman Pablo Gonzalez as saying.

Petronas also enacted a joint study and development agreement for the potential development of the Argentina Integrated LNG project. The proposed project will include dedicated upstream gas production, a new 600-kilometre pipeline to deliver the feedstock gas from Argentina’s Maca Vuerta shale play plus marketing and shipping.

While it is still early days, first exports could happen by 2029 if the companies elect to forge ahead.

Vast unconventional gas resources

“Our expertise in integrated LNG and unconventional plays will add value to the intent and synergy of both parties in further exploring potential LNG opportunities in Argentina, leveraging on Vaca Muerta’s vast unconventional gas resources,” said Petronas chief executive Tengku Muhammad Taufik.

The company is no stranger to Argentina – it has been active there since 2014, partnering YPF on the La Amarga Chica oil project in Vaca Muerta.

“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 [the] profits,” Reuters quoted Argentina’s President Alberto Fernandez as saying.

YPF three years ago embarked on a pilot project to export gas from Vaca Muerta in 2019 via the Tango floating LNG unit on a 10-year charter from Belgium’s Exmar. However, this charter was terminated prematurely when the coronavirus pandemic affected demand and left YPF unable to pay. While the Argentine company claimed force majeure due the pandemic, it ended up losing the related arbitration and agreed to pay Exmar $150 million in consideration of the early termination of the FLNG vessel’s charter.

The MoU between YPF and Petronas also paves the way for the companies to collaborate in other areas including upstream oil, clean energy solutions and petrochemicals. “Petronas is focused on expanding and diversifying our integrated opportunities to capture key markets. This collaboration signifies a continued aspiration to achieve shared business growth, as well as in providing sustainable and cleaner energy solutions,” added Tengku Muhammad Taufik.



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