YPF resumes crude exports with China shipment

OREANDA-NEWS. April 29, 2016.  Argentina's state-controlled YPF will export 200,000 bl of heavy Escalante crude to China next month in what is expected to be the first of several overseas crude sales this year.

YPF's shipment will be part of a cargo totaling 1mn bl led by BP-controlled Pan American Energy (PAE). PAE is 60pc controlled by BP with the balance held by Bridas, a 50:50 joint venture owned by Argentina's Bulgheroni brothers and China's state-owned CNOOC.

The shipment marks the first time YPF exports 24°API Escalante crude from the Golfo San Jorge basin since 2014, according to energy ministry data.

PAE regularly exports Escalante, which is too heavy for most local refiners and which it largely obtains from Cerro Drag?n, the country's largest oil field.

The export comes at a time when there is an excess of light 34°API Medanito crude from the Neuqu?n basin in the market because some refiners are processing less and others have been importing crude as a way to take advantage of lower international prices.

YPF has been absorbing much of this additional light crude, meaning that it now has an excess of Escalante, which it can only refine at its 189,000 b/d La Plata refinery, where a new \\$950mn coker is scheduled to begin operating in the second half of the year, boosting crude processing capacity by 23,800 b/d.

YPF also operates the 105,000 b/d Lujan de Cuyo and the 25,000 b/d Plaza Huincul refineries and holds a 50pc stake in the 32,000 b/d Refinor refinery.

YPF declined to comment on its planned crude exports.

By resuming crude exports, YPF will be able to benefit from a government subsidy of \\$10/bl for crude exporters as long as Brent stays below \\$47.50/bl. The federal government pays a \\$7.50/bl subsidy while southern Chubut province is responsible for the balance as part of an effort to prevent a plunge in production at a time of weak international prices.

While it subsidizes exports, Argentina keeps domestic wellhead oil prices above international prices as a way to stimulate production. Refiners pay \\$67.5/bl for Medanito and \\$54.9/bl for Escalante.

Escalante crude exports are poised to increase in coming months as companies take advantage of government export subsidies and permits to import cheaper crude from abroad.

The government of market-oriented president Mauricio Macri, who took office in December 2015, has been more flexible in allowing crude imports as a way to help local refiners offset higher domestic costs.

"Allowing more crude imports is a decision that has generated very direct consequences and the big fear now is that there will be a decline in upstream production," an industry executive said.

Crude exports from Argentina rose 15.7pc to 42,053 b/d in 2015 compared with 2014.

Argentina produced 520,000 b/d of crude in March, compared with 531,000 b/d a year earlier.