MercoPress. South Atlantic News Agency

YPF hires an LNG tanker to ship Vaca Muerta shale gas to global markets

A final agreement is to be signed in “the next few days” so the vessel can start operations in “the first week of September”, YPF said in a statement.

Argentina's YPF said on Thursday it reached a preliminary agreement with Texas-based Excelerate Energy to hire an LNG tanker for shipping cargoes to global export markets, as the state-backed energy company seeks to offload a growing surplus of shale gas production.

A final agreement is to be signed in “the next few days” so the vessel can start operations in “the first week of September” and continue them until the end of the contract in May 2020, YPF said in a statement.

The vessel is to load gas from Vaca Muerta, a huge southwestern shale play, at a floating liquefaction terminal in Bahia Blanca, a port in the south of Buenos Aires province, for shipping to buyers in global markets, it said.

Marcos Browne, YPF executive vice president of gas and energy, said the deal will allow YPF to “export surpluses in months of low local consumption.”

Argentina's gas demand fluctuations from 100 million cu m/d in the warmer months of October to April and 140 million-160 million cu m/d in the colder months of May to September, with peaks of up to 180 million cu m/d, according to data from Enargas, the national gas regulator. With national production at 132 million cu m/d, that means there is potential to export during the warmer months.

That potential is poised to increase as production recovers from a low of 113.7 million cu m/d in 2014, led by developing of Vaca Muerta, one of the world's largest shale plays.

Vaca Muerta led a 12% year-on-year rise in gas production in Neuquen, home to most of the play, to 76.83 million cu m/d in June, the highest since September 2005, the government of the southwestern province said on Thursday.

Excelerate's vessel will have 138,000 cu m of storage capacity for LNG, and loading will take 45 days, YPF said.

YPF has said that it plans to export an average of 2.5 million cu m/d of LNG from the floating terminal, which along with plans to increase sales to Brazil, Chile and Uruguay will help it to sustain gas production growth in Vaca Muerta.

There have been warnings that the growth could stall unless new markets for the supplies are found and more pipeline capacity is built to move the product out.

There are plans to build a new pipeline with 40 million cu m/d of capacity, and YPF is working on plans for an onshore liquefaction terminal that will help increase global sales. YPF has said it aims to announce the four- to five-year project before the end of the year.

The focus will be on selling LNG to Asia, YPF chairman Miguel Gutierrez said at an energy conference in June.

Argentina has a competitive advantage as a Southern Hemisphere supplier. Its “peak potential LNG production” during its summer months “coincides with strong winter demand from utilities in Asia,” according to Wood Mackenzie, a consultancy.