A consortium of oil companies, spearheaded by Argentina's state-run YPF SA, is in discussions with five major international banks to secure a $1.7 billion loan for the crucial Vaca Muerta Sur pipeline project, according to sources familiar with the matter.

The banks involved in the financing talks are Citigroup Inc., Deutsche Bank AG, Itau Unibanco Holding SA, JP Morgan Chase & Co. and Banco Santander SA. 

YPF, which holds a 27% stake in the pipeline, had previously disclosed seeking a syndicated loan of this amount but had not named the potential lenders.

The Vaca Muerta Sur pipeline is a significant infrastructure project designed to transport crude oil from Argentina's Vaca Muerta shale formation across northern Patagonia to a new port facility at Punta Colorada on the Atlantic coast.  

The total cost of the project is estimated at around $3 billion, with the remaining funding to be provided by the consortium members.

Other key players in the consortium include Chevron Corp., Shell Plc, Vista Energy, Pluspetrol SA, Pan American Energy Group (partially owned by BP Plc), and Pampa Energia SA. Shell and Chevron have recently finalized their participation in the project.

Securing this level of private project financing would mark a notable achievement for Argentina, where large-scale deals have been infrequent in recent years due to economic instability and capital controls.

The project has been included in President Javier Milei's RIGI program, which offers tax, currency, and customs incentives to attract investments. The pipeline is currently in the initial stages of development, with pipes being gathered near the shale fields.

Proponents view the Vaca Muerta Sur pipeline as essential to Argentina's aspirations to significantly boost shale oil exports, potentially reaching one million barrels per day by the end of the decade and establishing the country as a net energy exporter. 

The pipeline is expected to have an initial transport capacity of 180,000 barrels per day by late 2026, with the potential to expand to 700,000 barrels per day.