Dow Augments Strategic Argentina Investment

Dow Chemical Co. is increasing its decades-long strategic investment in Argentina with an aim to draw on more of the natural gas resources produced in the Vaca Muerta shale formation, located in the Neuquén Basin near Bahia Blanca. Neuquén is Argentina’s leading hydrocarbon-producing province.

Through its 28% share of Compañía Mega, Dow is investing more into an ongoing $400 million production increase that will double exports in ethane, propane, butane and gasoline at the oil and gas fractioning plant in the Bahía Blanca City.

This investment was initiated in 2024 by Mega, which is majority-owned by Argentine state oil & gas conglomerate YPF. Dow takes 100% of the ethane produced by Mega. About half of all production at the petrochemical complex is exported.

“As of the date of this annual report [Dec. 24, 2024], Mega’s project for the construction of a new fractioning module in the NGLs (natural gas liquids) fractioning plant in Bahía Blanca City is being executed, expecting start up by the first quarter of 2026,” states YPF, within its 2024 Form 20F, filed with the U.S. Securities and Exchange Commission.

Part of the funding for the latest phase of the Bahia Blanca expansion will come from a $59.5 million local bond, or obligaciones negociables, that Mega issued in March of this year — its first such bond — carrying a term of 24 months and an interest rate of 7.5%, according to multiple reports from the Argentine press. The bond carries a AAA rating by Fix SCR, an Argentine affiliate of Fitch Ratings.

“Through Mega, a company in which we have a 38% equity stake and we jointly control with Petrobras (34%) and Dow Chemical (28%), we operate a NGLs separation plant located in the Loma La Lata block, in the Neuquén Province; a NGLs fractioning plant, which produces ethane, propane, butane and gasoline located in the Bahía Blanca City, in the Buenos Aires Province; a pipeline that transports the NGLs produced in the Loma La Lata block to the Bahía Blanca City; and transportation, storage and port facilities in the NGLs fractioning plant,” YPF states in the 20F filing.

Mega has an aggregate maximum annual production capacity of 1.6 million tons of gasoline, LPG and ethane. YPF is Mega’s main supplier of natural gas for the development of these activities, the Form 20F indicates.

Vaca Muerta to Lift the Argentine Economy

The expansion of oil and gas production in the Vaca Muerta basin will contribute much-needed hard currency for the Argentine economy, now under a transformation recovery designed by President Javier Milei.

“The Vaca Muerta shale play, discovered in Argentina, contains an estimated 16 billion barrels of recoverable shale oil and 308 trillion cubic feet of shale gas, making it one of the top five unconventional hydrocarbon formations globally,” reported OilPrice.com on August 6. “Argentina’s crude oil production reached an average of 771,888 barrels per day in June 2025, with over 62% attributed to shale oil, positioning the country as Latin America’s fourth largest oil producer,” the analyst reports.

The Mega investment is relatively small compared to the total investment in the Vaca Muerta basin, OilPrice notes. “Significant infrastructure upgrades and substantial investment, including a nearly $36 billion investment plan by national oil company YPF from 2025 to 2030, are poised to further increase Argentina’s hydrocarbon output.”

International analysts Rystad Energy have been touting the Vaca Muerta potential for several years. “Crude oil production from Argentina’s burgeoning shale patch, Vaca Muerta, could surge in the coming years and top 1 million barrels per day by the end of the decade,” the agency reckoned in 2023.

“Vaca Muerta could be contributing $20 billion per year in total revenue [to the national economy] by 2030. Crude exports could be making their way to South American neighbors Brazil, Chile and Peru, as well as to the US and Europe,” Rystad adds.

Dow Products and Paint and Coatings

Dow Argentina’s subsidiaries include Dow Quimica Argentina, Rohm and Haas Argentina, and PBB Polisur. The company has offices and operates plants in the province of Buenos Aires at sites including Bahia Blanca, Buenos Aires, Colon, and Zarate, and in the province of Santa Fe at sites in Puerto General San Martin, and Venado Tuerto.

Dow Argentina provides a range of products for the paints and coatings industry, including binders, resins, additives, and silicone-based materials, according to a Google AI search. These products are used in various applications, from architectural coatings and industrial finishes to inks and wood coatings.

Dow is a key participant in Argentina’s specialty chemicals market, which is projected to reach a value of $19.6 billion by 2030 through a compound annual growth rate of 4.8%, according to a recent Global Markets report.

Dow’s Advanced Manufacturing Plan for Argentina

Dow has been formulating a plan for a closely-knit vertical integration of its businesses and suppliers in Argentina for years.

“Dow’s Advanced Manufacturing Plan (AMP) for Argentina outlines our views on how Argentina can build a stronger, more sustainable and more competitive economy through the development of a robust advanced manufacturing sector. In particular, this plan focuses on the importance of creating and enabling environment for advanced manufacturing, which drives the production of high value-add goods, creates jobs and fosters overall economic growth when innovative concepts, processes and technologies are applied,” the corporate website states.

The plan is based on the linkage of multiple levels of suppliers and manufacturers into a single organizational entity: “Industrial activities are integrated in increasingly rich and complex value chains, linking flagship corporations and small or medium enterprises (SMEs) across sectors and countries. In addition, the more a country’s manufacturing sector relies on domestic supply chains, the greater the potential multiplier impact,” Dow states.

The multiplier effect of Dow’s use of domestic ethane input plus its close linkage with suppliers creates very substantial gains, the company notes.

“We can see this multiplier effect as a chemical company that converts natural gas into innovative down-stream products. For every dollar Dow spends on natural gas as a raw material, we can create an additional $20 of gross output. Every job inside a petrochemical facility creates five jobs outside of it. That value chain alone creates tens of thousands of jobs,” Dow calculates.

“The path forward for Argentina is energy. It is the lifeblood of a strong economy. In the short-term, it will create thousands of jobs and revenue in oil and gas-producing territories,” Dow says. “The country should…upgrade…regulation in order to guarantee the [domestic] availability of ethane and other natural gas liquids, prioritizing internal consumption for industrial use instead of favoring the export of the resource in its primary state, leaving it contained in the natural gas,” the plan notes.

The AMP also envisions a greater use of advanced paint and coatings technology in consumer industries in Argentina. “Incorporating technologies such as polyurethanes, polyethylene, and special coatings when building can significantly reduce the energy consumption and increase the energy efficiency properties of the building,” Dow points out.

Dow also recommends that this AMP approach be spread to include countries neighboring Argentina: “When defining a long-term energy plan for Argentina, the approach necessarily has to be regional. The potential that the country holds in terms of unconventional resources will be reached to the fullest only if the whole Mercosur enters the discussion.”

Mercosur in English is the Common Market of the South, a “South American trade bloc that aims to promote free trade and economic integration among its member states. It was established in 1991 by the Treaty of Asunción, with the goal of creating a common market with free movement of goods, services, capital, and people. The current full members are Argentina, Brazil, Paraguay, and Uruguay,” Google AI describes. 

Several other South American countries have associate Mercosur member status, including Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname; Venezuela has been suspended as a participant. “Mercosur has evolved into a customs union with a common external tariff (CET) and free trade among its members. A major development is the ongoing negotiation of a free trade agreement between Mercosur and the European Union, which could create a large transatlantic market,” Google observes.