Commentary: Dow blazes trail in Argentina shale gas

27 September 2013 10:28  [Source: ICB]

US-based Dow Chemical’s agreement to jointly fund drilling for shale gas in Argentina with state energy company YPF is an interesting move to secure low-cost feedstock for its petrochemical and polymers production in the country.

The $188m (€139m) deal to develop the 45 sq km (17 sq mile) El Orejano block in Argentina’s Neuquen basin follows a memorandum of understanding signed by both parties in March.

Dow Argentina will invest $120m, while YPF will pitch in $68m, and the companies will also work to identify new petrochemical projects, according to YPF.

Dow is the sole producer of polyethylene (PE) in Argentina with a 120,000 tonne/year high density PE (HDPE) unit; two linear low density PE (LLDPE) plants with capacities of 290,000 tonnes/year and 150,000 tonnes/year; and one low density PE (LDPE) unit with 90,000 tonnes/year of capacity, according to the ICIS plants and projects database.

It has two ethane crackers at the site with capacities of 425,000 tonnes/year and 275,000 tonnes/year.

Dow’s strategy is to invest in feestock advantaged regions, and clearly this deal would fit the bill. If the partnership yields results, it could form the basis for advantaged feeds for Dow’s Latin America operations.

By: Joseph Chang
+1 713 525 2653

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