Argentina
High energy prices highlight the urgency to develop Vaca Muerta
Image courtesy of Petrocuyo
Of the all the major markets in Latin America, Argentina has been the most affected by rampant inflation in recent years. Even before the pandemic, the Argentinian Peso (ARS) had devalued from a rate of ARS4 to US$1 in 2012, to ARS60 to US$1 in January 2020. By August 2022, it took over ARS130 to buy US$1 officially, with the unofficial ‘blue’ rate reaching a staggering 290 to 1. You do not have to be an economist to realize the impact such figures have on purchasing power, both from a consumer standpoint, and for a chemical industry that relies to a large extent on imported raw materials.
In July 2022, the Fernández government named its third Minister of the Economy in the space of a month, with lower house speaker, Sergio Massa, outlining his plan to boost dollar revenues and rein in inflation in an attempt to support a public suffering economic hardship. The severity of the situation facing Argentina, while highly unfortunate in the short term, could help stimulate the level of public and private investment necessary for the country to leverage its vast reserves of natural resources, from copper and lithium in the northern provinces of San Juan and Salta, to non-conventional gas in Neuquén.
Argentina is famous for the quality of its beef, but investment into another type of ‘dead cow’ holds the key to revitalize its petrochemical industry. “In 2022 there has been renewed interest in the opportunities of developing Argentina’s Vaca Muerta natural gas reserves, which had dimmed for a few years, but has come into focus considering the war in Ukraine and increased commodity prices,” commented Gabriel Rodríguez Garrido, executive director of the Argentine Petrochemical Institute (IPA), who pointed to the recent tendering of a gas pipeline in the region as an example.
Rodríguez explained how the petrochemical industry can be a multiplier to monetize Vaca Muerta – the second largest non-conventional gas reserve in the world – industrializing gas into polymers, fertilizers and chemicals, as well as developing local industry and creating employment opportunities. He highlighted the role of gas as a protagonist in the effort to reduce carbon emissions, and the relief that pipelines can bring by reducing imports.
Jorge de Zavaleta, executive director of the Argentine Chamber of the Chemical and Petrochemical Industry (CIQyP), echoed the sentiment that investment is needed for Vaca Muerta to develop into a regional hub that sustainably fuels the whole region, with an estimated regular gas supply of more than 100 years. He provided details of the pipeline tendered that in its first stage would join Neuquén to a distribution center in the south of Buenos Aires: “We expect that for the second half of 2023 we will be able to move more gas, and for 2024 to 2025 increase Argentina’s transport capacity by 25%. As a consequence, we expect a second wave of investment in the upstream to supply the extra volume, which would also be tied to gas liquifying. We believe Vaca Muerta could really take off in two or three years.”
Argentinian State-run energy giant YPF has been the pioneer of pushing and promoting the development of Vaca Muerta as one of the country’s strategic lines for growth, according to Martina Azcurra, executive manager – chemicals at YPF QUÍMICA. “Throughout the years, the company has improved its knowledge of Vaca Muerta, and as a consequence, has advanced in the optimization of its operations, focusing investments in the most profitable areas,” said Azcurra, a statement illustrated by the level of investment YPF plans for Vaca Muerta in 2022: US$2.6 billion of the company’s US$3.8 billion total planned investments for the year, representing an increase of approximately 40% with respect to 2021.
Azcurra went on to discuss YPF QUÍMICA’s projects aimed at adding value to Vaca Muerta gas for fertilizers, plastics and methanol. “Through our JV with Profertil, we are assessing the expansion of their plant by adding an additional production train of approximately 1.4 million tons a year (t/y), which will help supply a growing regional market that is currently demanding over 8 million t/y of fertilizers.”
Stimulating recycling for a circular economy
The need to stimulate recycling was one of the priorities highlighted by Argentina’s petrochemical producers, each with their own initiatives to increase the circularity of their products. Javier Sato, CEO of Petrocuyo, suggested that the biggest challenge in this transition is the lack of education for residue separation, which is a cultural process that takes time to evolve. “That is why we are working with clients and their clients to support any initiative to use post-industrial and post-consumption plastics,” he said, commenting that at the moment, people demand the same properties from recycled plastics, but are not willing to paying a little more than plastics from virgin material. “If we do not want residues to end up in landfills, governments must be ready to invest in the infrastructure and education to see those residues recycled.”
Ariel Stolar, commercial manager – petrochemicals at Pampa Energía, revealed that the company’s petrochemical division is where they have the strongest focus on sustainability, mirroring the comments of Sato that recycling requires a cultural shift and education to demonstrate both economic and environmental value. He added: “We have been taking action to obtain PCR (post-consumer recycled resin) to reprocess. One of the focus areas of this is making social cooperatives that try to separate the product before it reaches the garbage. Once separated, it can be taken to a reprocessing plant to turn into pellets and then transformed into a useful product.”
“There has been an important change in recent years, whereby the full supply chain is expected to collaborate to reduce the carbon footprint, instead of working in siloes like before – there is no point in having efficient plants if the product will be distributed unintelligently.”
Andrés Gerschenson, General Manager, Mesucan
Petroquímica Rio Tercero (PR3), the Argentinian petrochemical company that produces more than 130,000 t/y of diversified products from its Rio Tercero plant, is focusing on implementing a new vision for the company to ensure long-term sustainability, according to CEO, Juan Pablo Ceballos. Acknowledging that plastics are at the front of the recycling agenda, Ceballos underlined that the foam business is not foreign to this world’s need to enter a circular economy: “There are a large number of developments to recycle mattresses, rigid foams and every kind of foam to reuse them. These practices are not significant in the region, but it is our responsibility to introduce them”.
When discussing carbon reduction targets, the hurdle for many working in heavy industry centers around Scope 3 emissions – those that are not produced or controlled by the company itself. However, service companies are adapting to align with their clinets’ goals, a point highlighted by Andrés Gerschenson, general manager of Argentinian logistics firm, Mesucan. “There has been an important change in recent years, whereby the full supply chain is expected to collaborate to reduce the carbon footprint, instead of working in siloes like before – there is no point in having efficient plants if the product will be distributed unintelligently,” said Gerschenson, adding that Mesucan is working on migrating from diesel to more efficient fuels like CNG (compressed natural gas) and LNG, and moving to more efficient transport means.
