YPF Eyes Sale of Lithium Unit as Focus Narrows on Shale Ramp-Up

(Bloomberg) -- Argentine state-run oil company YPF SA is considering a sale of its lithium unit as part of a sweeping divestment strategy to streamline investments into the heralded Vaca Muerta shale patch.

Executives are mulling an exit from YPF Litio, said a person familiar with the matter who asked not to be named because the information is private. The company has been reviewing business holdings that fall outside YPF’s traditional sphere of drilling for oil and gas and refining crude.

A sale of the unit would come just three years after it was created as YPF — and oil companies the world over — have looked to reposition themselves in the face of the energy transition.

YPF Litio has been exploring acreage in Catamarca province in Argentina’s corner of South America’s so-called lithium triangle, shared with Chile and Bolivia. Other big Argentine oil drillers, like the Pan American Energy Group and a unit of billionaire Paolo Rocca’s Techint Group, also have been diversifying into the country’s lithium resources.

YPF Litio also helped the previous leftist government’s efforts to nurture a lithium-ion battery industry in Argentina, rather than abroad. Together with Catamarca, it brokered a non-binding agreement with China’s Zijin Mining Group Co. to make battery cathodes.

Under new management appointed by the government of President Javier Milei — a libertarian who’s voiced little interest in national battery development — YPF is instead entirely focused on ramping up production in the Vaca Muerta, not only by drilling more wells but by spearheading key infrastructure projects.

YPF already has divested 22 aging non-shale fields and it is in talks with takers for about 30 more, while plans are afoot to sell fuel businesses in Chile and Brazil and a stake in a Buenos Aires natural gas distributor.

Chief Executive Officer Horacio Marin has vowed to hold onto profitable ventures, like a fertilizer manufacturer that’s a consumer of YPF’s natural gas, as well as to keep exploring two new oil frontiers: another shale patch and deepwater blocks off the Atlantic coast.

To that end, YPF Agro, a money-making agriculture business, could be made a standalone self-financing unit like power producer YPF Luz, the person said. YPF Agro taps Argentina’s huge crop industry by selling diesel and fertilizers to farmers and taking soybeans as payment in trades worth about $1 billion a year.

Meanwhile, it’s unclear what will happen with a battery program at Y-TEC, a research and development center that is affiliated with YPF Litio. Marin said he wants researchers to focus on technology that will aid the push in the Vaca Muerta, where it’s already cheaper to produce crude than in the Permian Basin, according to Rystad Energy.

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