11/06/26
Feedstock boom to drive Argentina petchems
Sao Paulo, 11 June (Argus) — Argentina's petrochemical industry has entered a
new investment cycle, supported by abundant feedstock from the Vaca Muerta
formation and a renewed push to add value domestically rather than export raw
molecules, company executives said. The executives, who gathered in Buenos Aires
on 9 June for an event marking the 50th anniversary of the Argentinian
Petrochemicals Institute (IPA), described a sector with access to a far larger
resource base than in the 1990s, when much of Argentina's current production
platform was built. The group included chief executives from leading companies
such as Mega, Profertil, Petroquimica Cuyo, Unipar and Dow. The key difference
today from the 1990s is scale, they said. The Vaca Muerta shale formation offers
abundant natural gas and associated natural gas liquids (NGLs) capable of
underpinning multiple industrial projects across the value chain. As feedstock
access is no longer the main constraint, Argentina now has sufficient ethane,
propane, butane and natural gas to sustain long-term growth. But the timing of
new projects will depend on global market conditions, financing costs and the
ability to provide stable rules for long-term investments. Executives
highlighted global imbalances as a major constraint for ethylene and its
derivatives. The global industry is operating in a downcycle, with utilization
rates below profitability thresholds and persistent oversupply in polyethylene
(PE) and polypropylene (PP), partly driven by rapid capacity additions in China.
At the same time, geopolitical tensions have introduced volatility in logistics
and trade flows. Any sustained disruption or capacity rationalization could help
rebalance markets and bring forward investment decisions in Argentina. Midstream
and petrochemical company Mega's expansion, in the Bahia Blanca port, emerged as
the most advanced downstream project. The company has commissioned a new
fractionation train after investing around $260mn, increasing liquids processing
capacity and enabling higher output of NGLs, critical feedstocks for
petrochemical chains. A second phase, submitted under Argentina's incentive
regime for large investments (Rigi), would expand transport and pumping capacity
between Bahia Blanca and Neuquen, raising the total investment to about $360mn.
The project is seen as key to unlocking greater availability of ethane and LPG
for ethylene, PE and PP production. Executives stressed that ethane
industrialization is strategically necessary but commercially challenging in the
short term. Rising LNG developments will generate large volumes of ethane that
must be extracted from natural gas streams. Without sufficient downstream
capacity, Argentina risks exporting or burning this feedstock instead of
converting it into higher-value petrochemicals. But weak margins and limited
demand growth continue to delay large-scale ethylene and PE projects.
Argentinian PP producer Petrocuyo reinforced the case for capturing more value
through domestic PP production. The company argued that Argentina should
prioritize converting propane into polymers rather than exporting raw molecules.
But it warned that Chinese overcapacity continues to pressure PP markets and
that high local financing costs remain a major barrier compared with lower-cost
international competitors. Brazilian chlor-alkali producer Unipar Carbocloro,
which also operates in Argentina, outlined a more defensive investment approach,
focused on competitiveness rather than volume growth. The company is evaluating
a modernization project in Bahia Blanca that would reduce electricity
consumption by around 30pc, cut water use and lower carbon intensity. Nitrogen
fertilizer producer Profertil pointed to comparatively stronger fundamentals in
fertilizers, although executives acknowledged that nitrogen projects currently
face fewer structural headwinds than olefins and polyolefins. The panel closed
with broad consensus: Argentina has the resources and industrial base to support
a new petrochemical wave. But converting feedstock into sustained growth in
ethylene, PE and PP will depend on aligning infrastructure, financing, market
timing and policy support. By Fred Fernandes Send comments and request more
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