How did Argentina's chemical and petrochemical industry perform in the last months?

In 2023, the Argentinian economic landscape was marked by national elections and stringent economic policies due to a shortage of US dollars, which led to restrictions and increased regulations on imports of goods, services and materials. Acquiring raw materials, software and spare parts was challenging despite a robust domestic demand. Nevertheless, the sector managed to export US$4.5 billion while importing US$10.7 billion, resulting in a deficit of US$6.2 billion, shared in economies worldwide. The US$4.5 billion exports represent approximately 18-20% of Argentina's industrial exports (excluding agricultural and mining). Key products include plastics, resins, performance, and refinery chemicals.

Under Milei’s new government, an ambitious macroeconomic stabilization project is underway. In the first half of 2024, the domestic chemical and petrochemical sectors saw reduced volumes in the local market, partly offset by exports. The domestic market is somewhat subdued, awaiting macroeconomic stabilization to kickstart a phase of increased demand for inputs.

What specific areas has CIQYP been advocating for in recent months?

As an association, we are deeply involved in representing the chemical industry within our country with government and stakeholders.

We negotiate wage agreements with the labor associations of the chemical and petrochemical sectors. Over the past two years, these negotiations have been particularly challenging due to Argentina's high inflation, requiring frequent negotiations.

Argentina needs regulatory clarity, and the RIGI framework is crucial for the industry and hydrocarbon investment. Due to its substantial production volume, Argentina has the potential to become a significant player in the LNG market. With abundant, competitive gas prices, we aim to replicate the success seen in the Gulf of Mexico in the US when unconventional hydrocarbon production began in the early 2000s. Achieving macroeconomic stability will reduce the need for stringent regulations, which have historically been inconsistent and unpredictable, causing nervousness among investors.

What is Vaca Muerta's potential, and what are its current challenges?

Vaca Muerta represents a potential "mini-Texas" for Argentina, mirroring the transformation seen in the US. Vaca Muerta boasts over 300 trillion cubic feet (tcf) of natural gas reserves. With Argentina's annual consumption at 1.5 tcf, these reserves could sustain the country for over 200 years. Additionally, amid the energy transition, hydrocarbons have a 50-year window that Argentina must capitalize on. Developing the necessary infrastructure is crucial to leverage these reserves.

Vaca Muerta faces evacuation challenges, but several significant investments are underway to transport oil from Neuquén to the Atlantic, with an alternative route to Chile. Additionally, a new pipeline in southern Argentina, expected to be operational in the coming years, aims to increase transport capacity from 700,00 barrels to 1.5 million.

On the other hand, Vaca Muerta's unconventional natural gas presents an even more complex evacuation challenge. It contains methane (typically natural gas) and natural gas liquids (ethane, propane, butane, and natural gasoline), each with distinct markets and prices. This diverse gas basket offers a more attractive return but handling it with this diversity poses a midstream challenge. Conditioning facilities are required at production sites to meet stringent pipeline restrictions regarding gas compositions and natural gas liquids content for efficient evacuation.

How is Argentina's petrochemical and chemical industry embracing sustainability?

We are engaged in three main aspects: improving energy efficiency within production sites, optimizing purchased resources, and enhancing the sustainability of sold products. In Argentina, there is a strong emphasis on developing energy efficiency measures. Additionally, the southern regions hold potential for economic energy generation, where turbines operate more efficiently than in Europe (50% uptime vs 30%). This has enabled various sectors to shift towards renewable energy.

Regarding the circular economy, Argentina collaborates to advance sustainable practices through its participation in ICCA (International Council of Chemical Associations). Argentina produces a range of plastics, including polyethylene, polypropylene, PVC, polystyrene and PET, and the Argentinian petrochemical and chemical industries closely monitor global developments.

What are your expectations for the industry in the coming years?

In 2024’s second half, we anticipate an improvement in demand, with companies ramping up exports. The future looks promising, with developments in unconventional gas and mining. We expect positive news in chemical and petrochemical investments between 2025 and 2030, driven by domestic demand and a sustainable supply of natural gas and liquid gas.