Shell Withdraws From Argentina LNG Project With YPF

Shell has withdrawn from the initial phase of the Argentina LNG export project being developed with state-controlled energy company YPF, the companies confirmed this week, marking a shift in the early planning of one of South America’s planned liquefied natural gas ventures.

Shell said it would not move forward with the initial phase of the Argentina LNG project, for which it signed a project development agreement with YPF in December 2024. A company spokesperson said Shell’s participation was limited to pre-FEED, the preparatory front-end engineering and design stage, and that it had opted not to join the next phase. Shell also said it continues to view Argentina as a “potentially attractive growth market” for LNG exports and remains open to future cooperation with YPF.

YPF’s Argentina LNG initiative is designed to exploit gas from the Vaca Muerta shale formation and convert it into LNG for export. The initial phase was planned to process up to 10Mt/y of LNG, sourced from unconventional gas resources and liquefied through floating or onshore facilities. However, project scope changes, including a reduction in Shell’s targeted share and output, were cited as key factors in the company’s decision to step back.

In response to Shell’s exit, YPF executives said the company will seek new partners to fill the gap left by Shell in the downsized LNG phase, which had been revised to about 6 MTPA from an earlier 12Mt/y target. YPF is prioritizing a parallel phase of the project with partners Eni and ADNOC’s XRG unit, aiming for a final investment decision (FID) around the middle of 2026 for that segment, which could reach 12Mt/y.

Industry analysts say the withdrawal of Shell complicates financing and execution timelines for the project’s early stages. Large LNG developments typically depend on strategic partnerships with companies possessing both technical expertise and long-term offtake capacity. YPF’s search for a replacement partner underscores the challenges in securing consistent investment in complex export ventures, particularly in markets outside the traditional LNG export hubs of North America and the Middle East.

Despite the setback, YPF and remaining partners continue to advance planning for Argentina LNG, working toward arrangements that would secure project financing, likely through international banks and export credit mechanisms. Final investment decisions for major infrastructure projects such as this often hinge on securing stable long-term contracts and clarity on supply, demand and regulatory conditions in both producer and buyer markets.

For Mexico and the broader Latin American energy industry, developments in Argentina’s LNG export plans have implications for regional gas markets. If Argentina succeeds in establishing significant export capacity, it could add competitively priced LNG supply to global markets, with potential effects on regional pricing, gas flows and infrastructure use. Mexico, increasingly integrated in North American gas networks and extending its own LNG export capacity, may see shifts in investment and trade patterns depending on how Argentina’s project evolves.

The Argentina LNG project is part of a broader push by several countries with unconventional gas resources to enter the global LNG market. Argentina has abundant gas reserves in Vaca Muerta but has faced infrastructure and policy challenges that have delayed exports. Floating LNG (FLNG) technology and phased development strategies reflect attempts to reduce lead times and capital intensity associated with traditional onshore terminals.

Shell’s withdrawal from the initial phase does not necessarily stall the overall project, but it requires YPF and its consortium to revisit partnership structures and financing arrangements to maintain momentum toward export capacity goals. The company’s continued engagement with other partners suggests the effort to develop Argentina’s LNG export capability remains active, even as the configuration of stakeholders changes.

As the global LNG market anticipates increased supply by the end of the decade, developments in Argentina will be watched closely by producers, buyers and investors seeking to understand evolving competitive dynamics, regional roles and opportunities for new export sources.