YPF unveils US$30-million five-year plan

State energy firm YPF this week announced an ambitious five-year plan including not only investments to the tune of US$30 billion but also the prompt payment of dividends and the reduction of costs. The moves will be financed out of an expansion of reserves, including a 26-percent surge in oil and gas production with non-conventional resources playing a key role.S

The plan, announced on Tuesday by YPF President Miguel Gutiérrez and his Chief Financial Officer Daniel González at the oil giant’s Puerto Madero headquarters, was presented at the New York Stock Exchange the following day. Average annual investment of US$6 billion will treble this year and make YPF by far the biggest investor in Argentina.

The 2018-22 plan was announced just a day after petrol pump prices rose by betwen 9 and 12 percent following last Sunday’s midterm elections. The Energy Ministry had previously freed fuel prices to reflect world market trends but the increases were apparently held back until after the elections.

In the eye of González, more competitive cost structures in today’s world are an absolutely central component of the plan. Production and reserves are to be expanded while streamlining costs at the same time; otherwise the punctual payment of dividends might be jeopardised. Cutting fracking costs at Vaca Muerta will be especially important here since such a major outlay of investment is only possible on the basis of the vast shale deposits of the Neuquén area where state subsidies under the Plan Gas (currently in arrears to the tune of US$600 million, according to YPF) will continue for now. Shale and tight gas production in Vaca Muerta is planned to augment by 150 percent in the next five years as against a company average of 26 percent.

A freight train connection to Vaca Muerta is seen as crucial to this. All projects will have to comply with profitability criteria before being further developed, the firm added. These criteria will be based on viability within world crude oil prices expected to average around US$50 per barrel in the near future. Apart from increasing production and vastly expanded reserves thanks to Vaca Muerta, YPF also plan to expand via diversification by doubling electricity generation to become the fifth most important player in that market. This will require the investment of around US$6 billion of the US$30-billion total. Furthermore, 200 new service stations will be added to the existing network of 1,539 in Argentina.