Argentina's Vaca Muerta unconventional oil formation is likely to be a game-changer for the country's energy outlook, except for the asphalt market.
Argentina had previously imported asphalt at only one point in its recent history — in 2017-18 — when demand was so great it outstripped production. It began importing again in 2022, even though demand is down.
"We imported asphalt in 2017-19, because we could not produce fast enough," the president of Argentina's asphalt board, dubbed the permanent asphalt commission, Mario Jair said. "We are doing it again, but now because we do not have crude available."
While Vaca Muerta gas is good for the country, it hinders asphalt production, he said.
"Vaca Muerta crude is very light, which is not right for asphalt production," he added. "As Vaca Muerta's production increases and traditional well production falls, I think we are going to become an importing country from here on out."
The Vaca Muerta formation holds an estimated 16bl bl of oil equivalent (boe) and 308 trillion cf of natural gas reserves.
Argentina's asphalt demand was at around 45,000 tonnes (t)/month in 2019, but dropped to around 35,000 t/month in 2022 after the pandemic and with the country's economic crisis. Inflation is running at over an annual 100pc and the economy is expected to shrink by 3pc this year.
State-owned YPF covers around 60pc of demand, with additional supply coming from Brazil's Raizen and trader Trafigura. YPF produces around 45pc of national supply. Around 40pc of asphalt was imported in 2022, according to data from the state-owned company.
The US is the primary source of imports. Argentina imported nearly 44,800t in 2018 and almost 29,700t in 2018, according to the US Energy Information Administration.
Argentina has imported 118,600t of asphalt so far this year, slightly less than the 136,000t over the same period in 2022, according to data from Vortexa.
A Singaporean vessel unloaded asphalt in Argentina on 30 August, a rare product flow in the global asphalt market. The 12,000dwt Zhuang Yuan Ao unloaded 10,300t in Campana, according to Vortexa data. Market participants said the lack of US dollars in Argentina are challenging imports. Some companies are using Chinese currency instead, which could explain the unusual asphalt flow.
Argentina also needs to reexamine the standard it uses for imports — which are tailored to domestic production — as output is likely to slip because of lighter crude from Vaca Muerta, according to Jair.
"We have higher parameters for viscosity," he said. "We need to review them to source imports from more sources."
