Key Takeaways
- Argentina’s state oil company YPF and Italian energy giant Eni formalized a strategic agreement to develop a large-scale liquified natural gas (LNG) export project from the Vaca Muerta shale formation to Europe.
- The initiative, witnessed by Presidents Javier Milei and Giorgia Meloni, involves an estimated investment of at least US$10 billion, focusing on flexible floating liquefaction vessels (FLNG) and new pipeline infrastructure.
- This deal is a crucial step in Argentina’s ambitious goal to become a major global LNG supplier, aiming to export 30 million tons per annum (MTPA) by 2030, significantly increasing its gas production and exports.
Argentine President Javier Milei and Italian Prime Minister Giorgia Meloni recently presided over a significant agreement between Argentina’s state-owned oil company YPF and Italy’s energy giant Eni. This landmark deal aims to propel the export of liquefied natural gas (LNG) from Argentina’s vast Vaca Muerta shale formation to Italy and other European markets, marking a pivotal moment in Argentina’s energy strategy.
The agreement, signed by YPF CEO Horacio Marín and Eni CEO Claudio Descalzi, commits both companies to establishing the necessary legal and financial framework to evaluate the project’s feasibility. The initiative is projected to require an investment of at least US$10 billion. This substantial sum will cover the construction of two advanced floating liquefaction vessels (FLNG) in Chinese shipyards and the development of a new gas pipeline connecting Vaca Muerta, in the Neuquén basin, to Punta Colorada on the Río Negro coast. The rapid progression of this agreement, signed less than two months after an initial Memorandum of Understanding (MOU) in April, is largely attributed to the strong political affinity between the two conservative leaders, Milei and Meloni, who also held a private dinner to discuss deepening bilateral ties, with energy cooperation high on the agenda.
The YPF-Eni partnership is designed to boost gas production in Vaca Muerta, transport it to the Atlantic coast, and then liquefy it using two FLNG units, each capable of processing 6 million tons per annum (MTPA) – equivalent to 28 million cubic meters per day (m3/d). While YPF initially considered an onshore liquefaction plant in Sierra Grande, Río Negro, the strategic shift to FLNG vessels offers greater flexibility, allowing for a phased scaling of the project. YPF’s overarching ambition is for Argentina to export 30 MTPA of natural gas by 2030, a volume equivalent to 141 million m3/d, which would effectively double the country’s current gas production.
This agreement with Eni builds upon similar ventures, such as the one YPF struck with Shell last December. Both projects are expected to reach the Front-End Engineering and Design (FEED) stage before the end of the year. Argentina’s LNG export capabilities are already expanding through other initiatives. A first FLNG vessel, the Hilli Episeyo, currently operating in Cameroon, is set to begin commercial operation in Argentina by early 2027, with a capacity of 2.45 MTPA (11.5 million m3/d). A second vessel, the MKII, under construction in China, will add 3.5 MTPA (nearly 16 million m3/d) by late 2028. These vessels are part of a project led by Southern Energy, a newly formed company with diverse stakeholders: Pan American Energy (PAE, 30%), YPF (25%), Pampa Energía (20%), Harbour Energy (15%), and Golar LNG (10%). This combined effort will enable Argentina to export 27 million m3/d of gas within three years, representing 18% of its current total production. Furthermore, YPF is also developing four additional FLNG vessels in China through separate but equitable partnerships with Eni and Shell, reinforcing its strategy to position Argentina as a significant new global supplier of LNG.
President Milei’s visit to Rome, part of a broader diplomatic agenda that includes a meeting with Pope Francis, underscores Argentina’s commitment to strengthening international economic partnerships. The Vaca Muerta project, supported by high-level political engagement, is crucial for Argentina’s economic future, promising substantial foreign currency earnings and significant investment. For Europe, particularly Italy, these exports offer a new source of energy diversification and security, crucial in the current geopolitical climate.
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