A liquefied natural gas production plant that would change the country’s energy matrix. This is how the previous government presented itself in 2022 for the Vaca Muerta natural gas liquefaction project by YPF in cooperation with the Malaysian company Petronas, one of the largest oil companies in the world and the fourth most important company in this sector. The two companies have been working together for eight years on developing the world’s second unconventional gas reserve. Last year, the project failed and the national company went out to look for other partners to develop it in another governorate, and the factory was no longer on the ground.
The initial idea was to build a gas pipeline and expand the port, for which they had already purchased the land. Once maximum capacity is reached, they plan to export 460 ships a year, according to official figures. At that time, before the construction of the Nestor Kirchner gas pipeline, which generated energy independence, Argentina was importing 35 ships a year during peak consumption in the winter.
The LNG production plant includes a total investment of 30 billion US dollars. This would allow the production of up to 5 million tons/year of LNG in the first phase. In ten years, when the project was completed, more than 25 million tons/year were produced and exported. Thus they announced that Argentina would enter the select club of the four LNG producing countries in the world so far.
Previous work between the companies included meetings every three months between the two parties, including appointments in Argentina and Malaysia. Pablo Gonzalez, then YPF president, even participated in one of the trips to Kuala Lumpur. During his term, he developed the Vaca Muerta Sur gas pipeline project, which directly benefited Rio Negro, as well as the liquefied natural gas project, expected in the province of Buenos Aires.
The signing of the memorandum of understanding with Petronas was announced after two years of work. At the time, company sources confided that they had extended the deadline for the formalization so that it would not overlap with the deadline for the Nestor Kirchner gas pipeline. It was anecdotal history for those who participated in it, and that is how they tell it when they remember it. Signed on Thursday, September 1, 2022: They signed the Memorandum of Understanding and the Joint Study and Development Agreement. By consensus, the oil companies reported the matter to the stock exchange as a relevant fact on the same day. However, the news on newspaper covers and conversations overshadowed the 8:52 p.m. That night someone attempted to assassinate then-Vice President Christina Kirchner.
A person familiar with the confidential negotiations between the two parties explained to PERFIL that there was an initial partnership agreement under which YPF would retain 51% and Petronas 49%. Both were about to open the shares to third parties after signing the final investment decision.
Why was he frustrated? The crackdown on the dollar and the economic difficulties faced by the country played a major factor. But he was also deeply involved in national politics. In an interview with Alejandro Fantino, President Javier Miley announced that he does not plan to establish an LNG plant in Buenos Aires due to his rivalry with the governor, which is why he will do so in Río Negro. “In Buenos Aires, you have the burden of Kiciloff, who has serially expropriated property. Are they going to entrust him to a communist? If he had wanted to do things right, he would have joined the National RIGI party,” Miley charged. “It is clear that he will go somewhere else. Would you invest in the place where Kiselov is? Why would he want a different Reggie, to do this with his communist ideas?” conclude.
“Let’s hope that Miley does not scare off Petronas. Please do not lead to the loss of this investment for Argentina,” Buenos Aires provincial governor Axel Kiselov asked last year. “If he withdraws, President Maili will have to explain to shareholders why it will not be implemented. We don’t want it to be like that because, regardless of location, we always wanted investment to be made in Argentina,” Buenos Aires Government Minister Carlos Bianco warned. “If this had been considered state policy, Petronas would have been here,” criticized Pablo Gonzalez, former CEO of YBF. At the same time, he explained that technicians from the Malaysian Oil Company “went several times to Bahia Blanca to study the logistical conditions, and they even reserved the land for the port of Bahia.”
“Petronas learned from the newspapers that the government wanted to move the gas liquefaction plant to Rio Negro, and they are very jealous of the communications. Many decisions were made without informing them,” lamented one person familiar with the agreement.
YPF denied the complaint about Petronas’ lack of interest in the Patagonia site. They expressed, “Not only did they support the resolution, but they issued a joint statement with us. They confirmed it alone in a statement. If they had not agreed, they would not have issued their own statement supporting the resolution.”
The fact is that Petronas defined its exit in the context of prioritizing the projects that it had in its portfolio and that it was going to implement, as it also had significant payments in other countries at the analysis stage. The economic complexities facing Argentina were not in favor of developing the ambitious liquefied natural gas plan that Argentina signed interest in two years ago. Instability and uncertainty have a greater impact, as it is a huge project whose investment recovery does not begin to appear until production progresses.
After this attack, YPF President Horacio Marin confirmed that YPF would continue with the project and would look for another partner of the necessary size to take it forward. Thus, they have formed a consortium that will no longer develop the plant plan on land, but will liquefy the gas in ships, significantly reducing the capital requirements for the first steps.