Argentina secures FLNG vessel: Update

Adds comments, perspective of YPF.

Argentina's state-controlled YPF and Belgian shipowner Exmar signed a 10-year charter agreement for a floating liquefaction vessel (FLNG), which will be used to produce and export LNG from Argentina's growing shale play.

The 16,100m³ Tango FLNG barge — formerly Caribbean LNG — supplied by Exmar has a liquefaction capacity of 0.5mn t/yr. Up to eight cargoes per year could be produced from the facility, Exmar said today. This would mean an average below-standard cargo size of 62,500t. The vessel will operate in the port of Bahia Blanca from the second quarter of 2019.

"This is something that is very transcendental for Argentina, we weren't even considering it a few months ago and now we're entering the exclusive club of LNG exporters," said YPF board chairman Miguel Gutierrez at a news conference in Buenos Aires alongside Exmar executives.

The Argentinian firm expects revenue of around $200mn/yr from LNG exports that will represent around 5pc of its total gas output.

The vessel is scheduled to arrive in Argentina in February with the aim of starting operations before the southern hemisphere winter when domestic demand peaks.

The signing of the contract between the two companies "established a world record in speed of discussions and negotiations," said Exmar chief executive Nicolas Saverys, noting that talks began on 8 August.

The vessel had been initially built for a client in Colombia that "ran into financial difficulties," said Saverys, alluding to Pacific Rubiales' ill-fated floating liquefaction project near Cartagena. Colombia now has a regasification terminal outside Cartagena.

Under current forecasts, YPF will operate the barge nine months of the year with estimated output of 0.4mn t/yr, although it expects to be able to operate it year round after the first 24 months, said Marcos Browne, YPF's gas and energy executive vice president.

The biggest market for YPF's LNG will be Southeast Asia.

Argentina did not renew the charter contract for its Bahia Blanca floating storage and regasification unit (FSRU), and the 150,900m³ Exemplar left the terminal in October. This leaves Argentina with only its Escobar import terminal. But vessels delivering to Escobar can only unload partial cargoes because of draught constraints.

In an effort to reduce its net LNG imports, YPF foresees a scenario in which LNG from Bahia Blanca could be sent to Escobar during periods of peak demand, said Browne.

Argentina's growing production from the Vaca Muerta shale formation in Neuquen province has reduced the country's need for pipeline and LNG imports in recent years, even allowing the resumption of some pipeline exports to neighboring Chile. But Argentina may still need LNG imports, in addition to pipeline imports from Chile, to meet peak Austral winter demand.

In anticipation of much higher domestic production, YPF is currently studying the possibility of installing an LNG export terminal that would have at least 10 times the liquefaction capacity of the Tango to handle excess gas output.

Gross gas production in January-August stood at 31.3bn m³, up from 29.7bn m³ over the same period a year earlier, according to energy ministry data. Strong production growth from Vaca Muerta drove the increase.

Aggregate gas supplied to consumers was at 32.2bn m³, up from 30.7bn m³ a year earlier, based on data by gas regulator Enargas.

The 1.6bn m³ increase in production allowed the country to reduce its aggregate imports to 8.1bn m³ in January-August from 8.5bn m³. But gross production remained below aggregate gas demand, and reinjections and production losses were set to leave net production even lower. And the country was still a net importer, despite resuming pipeline exports to Chile.