The Argentine petrochemical industry has not expanded capacity since 2006 due to insufficient natural gas feedstocks. With $15 billion of investment, capacity could double by accessing shale gas deposits which could supply feedstocks. However, without investments, Argentina's petrochemical trade deficit could reach $4.5 billion by 2025 due to stagnant capacity and rising imports. High inflation and economic uncertainty also challenge attracting the large investments needed to develop Argentina's shale gas resources and expand its petrochemical industry.

1. 24 | IHS Chemical Week, October 20/27, 2014 chemweek.com
Argentina: Rich in shale deposits
but with a struggling economy
Jorge de Zavaleta, president of the Petrochemical Institute
of Argentina (IPA; Buenos Aires); and Alfredo Friedlander,
executive director of IPA, speak to CW about the state of
Argentina’s petrochemical industry and the conditions in
which it is currently operating.
CW: What is the present state of Argentina’s
petrochemical industry?
JdZ: Argentina’s petrochemical industry
has not installed new capacity due to the
fact that, until now, it has lacked the nec-
essary raw materials basically derived from
natural gas. If more feedstocks were avail-
able, Argentina’s petrochemical industry
would very likely increase its production.
AF: [Just to put it in context, the] Argen-
tine petrochemical industry grew its in-
stalled capacity significantly at the end of
the [1990s and early 2000s]. At this point,
a second steam cracker—with the capac-
ity to produce 425,000 m.t./year of ethyl-
ene—was inaugurated in the petrochemi-
cal complex at Bahía Blanca. A fourth;
290,000-m.t./year polyethylene (PE) plant
was also installed then. The cracker and the
PE plant are both operated by PBBPolisur
[a subsidiary of Dow Chemical]. The new
cracker was supplied by an expansion of
Compañía Mega’s natural gas liquid (NGL)
separation unit, which also took place at
that time. Around the same time, Profertil
commissioned its 750,000-m.t./year am-
monia plant together with a 1.1-million
m.t./year urea unit.
CW: How has the industry evolved since
those capacity expansions?
AF: Argentina’s petrochemical capacity al-
most doubled—from 4 million m.t. to 7 mil-
lion m.t./year—between 2000 and 2001.
At that time, production of NGLs, the raw
material for the Bahía Blanca petrochemi-
cal complex, was growing year-on-year,
covering demand. However, after peaking
in 2006, production began to decrease due
to a lack of enough raw materials mainly
from natural gas. Since then, the petro-
cover story
Argentine economy. GDP returned to pre-
crisis levels by 2010 and 2011, although
the growth rate slowed down in 2012 and
2013, when it reached 2% on average. How-
ever, this year will be the first when GDP is
expected to decrease—by 2–3%.
CW: Given the fragile economic backdrop,
how has Argentina’s trade balance evolved
in terms of petrochemical products?
AF: The petrochemical sector balance of
trade was negative throughout the 1990s,
reaching a deficit of $650 million at its
peak in 2000. Over the decade that fol-
lowed, petrochemical trade was balanced,
and it reached a $100-million surplus in
2002. Since then, however, petrochemical
trade has again turned to a deficit, as im-
ports have increased alongside GDP. The
petrochemical trade deficit in the current
decade already exceeds $2 billion, as no
new petrochemical capacity has been in-
stalled while existing capacity is not oper-
ating at full rates. In terms of volumes, the
polyolefin—PE and polypropylene—deficit
is over 200,000 m.t./year, and, in the case
of polyethylene terephthalate, it is about
50,000 m.t./year.
JdZ: Argentina’s petrochemical industry
has been working on a report—within the
framework of the government’s 2020 in-
dustrial strategy—on the industry’s out-
look to 2025. This study was prepared by
the Hydrocarbons and Energy Commission
within the Chemical and Petrochemical
Industry Chamber, supported by IPA. The
data was gathered among 14 petrochemi-
cal companies, representing some 90%
chemical industry has never achieved more
than 90% of installed capacity, and during
the winter months its operating rates range
between 60% and 75% of total capacity.
CW: How is the macroeconomic context
weighing on this decline?
AF: From a macroeconomic perspective,
Argentina’s GDP kept growing unhindered
from 2003 to 2008 at an annual rate of
8–9%. Nevertheless, the global crisis—
in full swing by 2009—also impacted the
FRIEDLANDER: Since 2006, theArgentine petchems
industry has not achieved more than 90% capacity.
DE ZAVALETA: Without investments,Argentina’s trade
deficit could reach $4.5 billion by 2025.

2. years of the 2003–07 [Cristina] Kirchner
presidency, figures from the national sta-
tistics office, Indec; and independent con-
sultants matched. The annual inflation rate
was around 10%. However, this changed in
2007. Official figures indicated annual in-
flation was around 10–12%, while, in real-
ity, in 2007–13 it was above 20% except in
2009, when it was closer to 15%. The ex-
chemweek.com IHS Chemical Week, October 20/27, 2014 | 25
of the production in this sector. The lat-
est estimates indicate that with sufficient
availability of raw materials, namely natu-
ral gas and liquefied natural gas, some $15
billion could flow into the petrochemical
sector into projects that would double the
existing installed capacity. However, with-
out these investments, the petrochemical
trade deficit could reach $4.5 billion/year
by 2025.
CW: What about other feedstock/raw ma-
terial sources?
JdZ: The great hope is the availability of non-
conventional resources, particularly shale gas.
Argentina’s position is now well researched
and, according to [US Energy Information
Agency] studies, the country ranks number
two worldwide, behind China, in terms of
shalegasdeposits,with802trillioncubicfeet,
with the main deposits found in Vaca Muerta
and Los Molles, Neuquén Province. NGLs con-
tent in the natural gas from shale gas (accord-
ing to the information I have) is very similar to
Eagle Ford, TX.
CW: There are already some partnerships to
invest in these areas.
JdZ: It is a well known fact that the exploi-
tation of these deposits requires a high lev-
el of investment. This year, the governor of
the province, Jorge Sapag, expects invest-
ment into nonconventionals—particularly
by Yacimientos Petroliferos Fiscales (YPF),
with support from other companies like
Chevron—will amount to some $5 billion.
Petronas has also recently expressed inter-
est in pursuing a partnership with YPF in
Neuquén. However, to be able to develop
the potential of nonconventionals in Ar-
gentina would require an investment 10
times this sum. For this, Argentina needs to
build investor confidence, which is a chal-
lenge due to the country’s macroeconomic
situation or issues like next year’s presi-
dential elections.
AF: Another aspect to take into account is
the inflation rate. During the first three
isting discrepancy between Indec figures
and the real inflation rate has increased,
and private estimates indicate that the in-
flation rate this year will be approximately
35%. This growing disparity is also reflect-
ed in the increasing gap between the offi-
cial dollar-to-peso exchange rate, peso8.5,
and the unofficial exchange rate—close to
15 pesos/dollar. —FRANCINIA PROTTI-ALVAREZ
cover story
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With sufficient raw
material availability, some
$15 billion could flow into
the petchems sector and
double existing installed
capacity.