MOSCOW (MRC) -- Argentina's state-backed energy company YPF plans to ramp up it investment 73% this year, with the brunt of the increased spending going toward rebuilding oil and natural gas production after a 10% slump in 2020, reported S&P Global with reference to a company source's statement Jan. 26.
YPF aims to increase investment in its upstream business more than 90% this year compared with 2020, making it possible to "stabilize" oil and gas production and set it up to return to growth despite the natural declines at maturing conventional fields, the source said on the condition of not being named, citing company policy.
The plan, however, hinges on "the availability of cash," the source added.
To free up cash for investment, the source said YPF is trying to restructure USD6.2 billion in international bonds, but so far bondholders have objected to its proposal. In response, the company has improved the offer to limit losses for bondholders while making a return to production growth more viable than if nothing were done.
"One of the objectives of this debt refinancing is to allocate funds to increase investments that make it possible to reverse the decline in the production of gas and oil in recent years," the source said.
Bondholders have until Feb. 8 to accept the offer.
Argentina's biggest oil and natural gas producer, YPF cannot readily borrow money on the international capital markets because the country is mired in its third year of a financial crisis, deterring lenders. This means it must rely on cash flow, which has been only slowly recovering after an eight-month lockdown of the economy last year slashed sales of diesel and gasoline. As a result, YPF's upstream and downstream investment plunged to USD934 million in the first nine months of 2020 from USD3.3 billion in all of 2019, according to company data.
In a November conference call with investors, YPF CEO Sergio Affronti said the company's total oil and gas production was likely to decline 10% in 2020 from 2019, but he added that as demand recovers the company will be able to gradually increase output.
YPF has since said that it plans to invest more in enhanced recovery techniques in its conventional fields to squeeze more out of the maturing reserves, while pursing growth in Vaca Muerta, one of the world's largest shale plays. The company wants to boost its share of crude production from Vaca Muerta to 25% of the total in 2021 from 20% in November 2020, and then take it to 45% or 50% in 2022 or 2023. YPF is the biggest producer in the play.
As MRC informed before, in 2015, Argentina's state-controlled YPF and the Argentinian unit of US-based Dow Chemical unveiled investment of USD500 mln to be dome in 2016, in orer to triple production at their existing shale gas joint venture, marking the first major upstream investment since a new government took over in December, 2015. The companies are partners in the El Orejano block, located in the Vaca Muerta shale formation in the southwestern province of Neuquen. That investment was aimed at increasing production to 2mn m3/d (70.6mn ft3/d) by the end of 2016, from the previous 750,000 m3/d, YPF said then.
As in March, 2019, YPF announced that it will invest around USD2 billion over the next five years to carry out a desulfurization process in two of its refineries. YPF will initially invest more than USD1 billion in its Mendoza province refinery and hire about 900 people to adapt the plant for the process. The rest of the investment will go towards the company’s refinery in La Plata.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
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