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Argentina Begins to Tango

YPF’s launch as an LNG exporter went to plan with the Tango FLNG barge at near capacity

YPF’s Tango FLNG barge moored at the port of LPG fractionator Mega – a joint venture consisting of YPF, United States chemicals major Dow and Brazil’s state-controlled petrochemical champion Petrobras – has exported its first LNG cargo aboard the LNG carrier Excalibur in the late evening hours of Friday last week. YPF has maintained throughout that formal trading will commence in 3Q 2019 despite various reports a cargo had already been shipped in June this year. The company’s LNG export last week thus marks the passing of a milestone in Argentina’s strategy to reverse the flow of the expensive fuel.

Tango born as Caribbean FLNG

The 0.453mmt Tango barge was installed as part of a 10-year charter signed with Exmar, a Belgian fleet owner/operator, in November 2018. The floating production facility was delivered to YPF in February. Tango had originally been built as Caribbean FLNG to serve a contract in Colombia where Pacific Rubiales Energy wanted to liquefy gas from its La Creciente gas field.

Argentina’s first LNG export in November, not June

Although it was widely reported that Cheniere had purchased Tango FLNG’s first production as a partial cargo via the Fuji LNG in early June this year, the 30,000m3 cargo at the time was not part of regular production but a result of the starting up of Tango. The process left YPF with the choice of either leaving it in the tank or selling it on the spot market. Unfortunately, the Fuji LNG was unable to berth alongside the Tango barge in June due to a strike called by the dockers’ union at Bahia Blanca, which makes last week’s cargo aboard the Excalibur Argentina’s first LNG export.

Exmar’s LNGC Excalibur shipped c. 0.054mmt, pegging Tango at near capacity

Before arriving at Bahia Blanca in the afternoon on 12 September, the Excalibur haddelivered a partial cargo of 0.027mmt to Argentina’s Escobar import terminal on 25 June. The vesselis currently headed for a yet-to-be disclosed destination in the Atlantic Basin and was carrying around 0.054mmt at load point, our LNG Market Tracker shows, suggesting the Tango FLNG barge is producing near capacity at eight cargoes p.a.

Next export aboard the controlled Methane Kari Elin

YPF has also lined up an export for Shell’s portfolio to be shipped via the STASCO-controlled Methane Kari Elin, which went alongside the Tango barge on Monday afternoon. We are currently expecting the 138,267m3 vessel to ship another 0.05mmt within the next 7 days. Whilst the Methane Kari Elin typically loads cargoes within 20 hours of arrival, we have allowed for more time in our outlook due to Tango’s size and potential teething problems.

Argentina is keen to monetise Vaca Muerta shale gas

State-owned YPF is keen to monetise excess supply growth from shale gas production at the Vaca Muerta play to improve its trade balance and place development on a more sustainable footing. As such, the company hopes to reach markets outside South America via the LNG route. The Tango FLNG project is intended to be the country’s first step on that journey, with a much larger liquefaction plant (20-25mpta) on YPF’s drawing board.

Whether this plan will come to fruition will to a large extent depend on foreign direct investment – not only in gas liquefaction infrastructure but also the Vaca Muerta play itself where constant drilling is required to stave off rapid production decline on an individual well level.

YPF under pressure to clear gas infrastructure backlog

Meanwhile, an extensive infrastructure backlog built up over the past decade is adding to Argentina’s capital demands. YPF is pushing to expand gas exports to Chile, where Enel Generación Chile and Colbún respectively signed new supply contracts with YPF over 365mln m3 p.a. and 1.095bln m3 p.a. Previous deliveries, however, have been volatile as Argentina’s pipeline capacity struggles to cope at times of high demand, which is both responsible for supply interruptions and LNG imports. Whilst there have not yet been indications this would impede operations at Bahia Blanca, Argentina is also currently not in high gas demand season. Nevertheless, the relatively small capacity of the barge is unlikely to introduce unmanageable strain to the national pipeline system.