September 02, 2022 [ Reuters ] – Argentina’s state oil company YPF and its Malaysian counterpart, Petronas, inked a deal on Thursday to build a major liquefied natural gas (LNG) plant and a pipeline to transport the fuel, as demand for the fossil fuel spikes globally.
The preliminary agreement between the two companies was signed at a ceremony in Buenos Aires with President Alberto Fernandez cheering on the projects alongside YPF’s top executive Pablo Gonzalez and Petronas CEO Tengku Muhammad Taufik.
The fallout from Russia’s invasion of Ukraine on world energy markets has spurred growing interest in LNG shipments as major European economies that for decades have depended on Russian natural gas scramble for alternative supplies.
The YPF-Petronas project calls for an initial investment of around $10 billion, which the companies said will power output of 5 million tonnes of LNG during the first year of operation, but they did not specify when the plant is expected to come online.
The companies also said the project will take a decade to complete, and at that point will likely produce and export up to 25 million tonnes of LNG annually.
The source of the exports will be Argentina’s massive Vaca Muerta shale formation, which Fernandez was quick to tout.
“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 profits,” said Fernandez.
The LNG project promises future dollar earnings for the cash-strapped South American country even though the gains are still years out. Growing production from Vaca Muerta should also allow for less reliance on costly gas imports over time.
Thursday’s deal marks a new phase for an already well-established partnership between YPF and Petronas.
In 2018, the companies announced a $2.3 billion investment to develop a shale oil block in Vaca Muerta, one of the world’s top oil and gas shale reserves.
Reporting by Eliana Raszewski
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