Building on Argentina’s rising natural gas production and new-found status as a seasonal exporter of LNG, state energy company YPF has contracted McDermott International to provide pre-front-end engineering design (Pre-FEED) services for a 5-mta LNG onshore liquefaction facility, with a potential expansion to 10 mta, at the Vaca Muerta Shale field in Argentina.
The US Energy Information Administration (EIA) reported that Argentina’s domestic natural gas production has been rising steadily in the past three years, largely because of increasing production from the Neuquén Basin’s Vaca Muerta shale and tight gas play. Production from Vaca Muerta surpassed 1.0Bn ft3 per day (Bcf/d) in December 2018. As production has grown, Argentina has resumed exporting natural gas by pipeline to neighbouring Chile and Brazil.
Argentina exported its first LNG cargo from the newly commissioned Tango FLNG facility on 6 June. The FLNG has a capacity of 0.5 mta of LNG and is expected to produce about eight cargoes of LNG annually.
The project with McDermott underpins the vast Vaca Muerta shale field’s development. The growth in Argentina’s shale and tight gas production has partially offset declines in its natural gas production from mature fields, said the EIA.
Vaca Muerta, as large as Eagle Ford in Texas, accounts for about 23% of Argentina’s total annual gas production. It has technically recoverable resources of 308M ft3 of natural gas and 16M bbl of oil and condensate. Only about 4% of the field’s acreage has been developed.
Argentina needs to invest billions of dollars into building pipelines, storage terminals and possibly additional FLNG units to benefit from its vast shale gas resources.
The latest contract continues a previous conceptual study developed for the onshore YPF LNG export facility in Argentina in 2018. McDermott’s London office will provide engineering services, while its Houston office will perform project management and estimation services.
"The award of this pre-FEED project is a testimony to McDermott’s technical expertise in LNG and our successful partnership with YPF over the years", said McDermott’s senior vice president for North, Central and South America Mark Coscio. "Our experience as the EPC contractor for the Peru LNG Facility in which YPF was involved – combined with McDermott’s modularisation capabilities – were key factors that made us uniquely qualified to win and execute this contract".
During its warmer months (October to April), Argentina exports its surplus domestic natural gas production via pipeline to Brazil, Chile and Uruguay, while in its colder months it must meet domestic natural gas demands through imports from Chile and Bolivia and LNG from other countries.
In 2018, Argentina imported 2.59M tonnes of LNG, down 22.5% from 2017, with Qatar, US, Nigeria and Equatorial New Guinea as the leading suppliers. As investments in domestic natural gas production, pipeline and storage increases, LNG imports are expected to cease altogether.