Argentina's investment in shale plays to boost supply of petrochemical feedstock

27-Jan-14

Argentina's petrochemical sector plans to invest in developing oil and natural gas supplies from shale plays like Vaca Muerta, helping to boost feedstock supplies to expand production capacity, as per a government official reported by Platts. Of the six biggest polymer and plastics producers, "at least two" have started investment plans for shale development. The first mover in this sector has been Dow Chemicals that entered into a partnership in September with Argentina's state-run YPF to develop a pilot production project for shale gas on the El Orejano block, with a combined investment of US$188 mln in the first year to drill 12 wells for shale gas resources, targeting the Lajas, Sierras Blancas and Vaca Muerta plays. The companies estimate peak production could surpass 3 million cubic meters/day. Dow plans to use the additional gas supplies from its partnership with YPF to boost gas feedstock supplies at its plants in Bahia Blanca, which have capacity to produce 700,000 mt/year of ethylene and 600,000 mt/year of HDPE, LDPE and LLDPE. With the additional supplies of gas, Giorgi said petrochemical companies would be able to increase production and expand capacity at their plants, helping to reduce imports of gas, gas-based feedstock and petrochemicals. Polymer producers, for example, have been increasing imports of ethylene as feedstock, in particular during the May-to-September cold season when gas shortages peak. State-run YPF has started producing the first supplies from the play, with output running at 13,000 b/d of oil equivalent, most of it light crude, in third-quarter 2013. YPF has teamed with Chevron on a $1.5 billion pilot production project, while other companies like ExxonMobil, Shell and Total are starting to drill for supplies. "Argentina is importing nearly $900 million worth of petrochemical products a year. By developing Vaca Muerta and other shale plays, the petrochemical companies will have more feedstock to increase production, helping to reduce the imports”, Giorgi said.