Argentina's YPF to Build $2.5 Billion Pipeline to Unlock Vaca Muerta Shale Oil Exports

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Argentina's YPF to Build $2.5 Billion Pipeline to Unlock Vaca Muerta Shale Oil Exports

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Argentina on the map (© Shutterstock/hyotographics)
Argentina on the map (© Shutterstock/hyotographics)

Argentina's state-run energy giant YPF SA is moving forward with a $2.5 billion pipeline project crucial for exporting crude oil from the vast Vaca Muerta shale formation in Patagonia, Bloomberg reported on Friday, May 10, 2024.

YPF secured environmental approval for the Vaca Muerta Sur pipeline and is seeking bids for construction, said Max Westen, head of strategy and business development. The pipeline aims to address limited capacity, a major obstacle to Vaca Muerta's development.

"The environmental permit is a key milestone," Westen said. "There's a lot of interest" from other oil companies in participating in the project, he added.Vaca Muerta holds immense potential, but unlocking exports requires infrastructure. YPF is also exploring partnerships for a liquefied natural gas plant.

Last year, the government built a new pipeline for shale gas, reducing reliance on LNG imports. It also reversed a pipeline flow to supply Argentina's north with domestic shale gas, potentially enabling future exports to Brazil.

However, crude oil exports offer a faster path to generate revenue for Argentina's struggling economy. Drillers are ramping up Vaca Muerta oil production, and sales have recently resumed in Chile.

YPF is also investing in expanding existing facilities on the Atlantic coast to increase crude export capacity.

Vaca Muerta Sur will stretch from Neuquen province to Punta Colorada, where a port will be built for tanker loading. The pipeline's initial capacity is targeted at 180,000 barrels per day in 2026, with potential for future expansion to 700,000 barrels.

"Vaca Muerta Sur is the most competitive route to monetize Vaca Muerta's crude," Westen said, highlighting its priority for YPF.

YPF's net shale oil production in Q1 reached a record 112,000 barrels per day. The company's new leadership is focusing on Vaca Muerta by divesting mature oil fields to boost its stock price and resume shareholder dividends. 

The company received interest from 70 companies during an investor roadshow and expects to complete asset sales by year-end. 

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