YPF in talks with energy transfer to fund Argentina pipeline

Argentine crude driller YPF SA has held talks with US pipeline company Energy Transfer LP to finance a cross-country conduit that’s key to the South American nation’s ambitions of ramping up shale oil exports.

State-run YPF, the biggest oil producer in Argentina’s Vaca Muerta shale patch, is spearheading development of the pipeline, which is estimated to cost US$2.5 billion. It’s been in conversations with Energy Transfer to fund the project, according to two people familiar with the matter who asked not to be named as the talks are private.

A spokeswoman for Energy Transfer declined to comment on the matter, adding that the company is looking at opportunities inside and outside the United States. A spokesman for YPF declined to comment. 

YPF needs outside backing to pay for the pipeline, called Vaca Muerta Sur. It is negotiating with other oil drillers in Argentina, who require extra transportation capacity to unlock production, and would bring in additional partners once that consortium is in place, said one of the people.

Economic boost

The pipeline would give a significant boost to Argentina’s share of global oil exports and help stoke the country’s economy. The nation desperately needs new sources of export dollars beyond its traditional crop shipments to increase central bank reserves, where shortages of hard currency have driven recurring crises.  

The conduit is key to reaching a goal of exporting some half a million barrels a day of shale oil by the end of the decade. Vaca Muerta’s exports are currently just north of 100,000 barrels a day. Shipments from the shale patch have been severely constrained by pipeline bottlenecks, and some production still has to leave the fields in trucks. 

YPF is already building a 128-kilometre (80-mile) duct to take oil from shale fields to the town of Allen in Río Negro province. The larger project that Energy Transfer may partner would involve laying down 437 kilometres of pipe from Allen to the Atlantic coast, where a port will be built at Punta Colorada, an old iron-shipping outpost.

The project may qualify for a series of tax, currency and customs benefits included in a sweeping reforms law drafted by libertarian President Javier Milei, who has been in power for seven months.

Incentives programme

The benefits package — known as RIGI, the Spanish acronym for the “incentives programme for big investments” — is designed to lure international investors who have avoided Argentina because of years of volatile policies, especially controls on taking money out of the country.

RIGI establishes investors’ rights to freely use proceeds from exports, including keeping them abroad. That will reduce borrowing rates to finance infrastructure projects in Argentina, said Marcelo Etchebarne, a managing partner at law firm DLA Piper’s Buenos Aires offices.

Dallas-based Energy Transfer operates more than 125,000 miles of pipelines for energy products and several export terminals in the United States, and has offices overseas in China and Panama, according to its website.