May 2021 – @alvaroriosroca – Until the end of 2019 we still had a positive view of the gas equation in the Southern Cone and even envisioned a possible surplus of natural gas production by 2025 https://www.gasenergyla.com/es/superavit-de-gas-en-el-cono-sur/. The companies in Vaca Muerta were starting to drill, lower costs and increase production. YPFB and the few private companies still operating in Bolivia had some exploratory prospects that could discover new reserves and new production by 2025.
Natural gas production associated with oil in Brazil’s Pre-Salt seemed to be going from strength to strength and it was expected that less gas would be injected and more gas would be destined for the domestic market. Finally, a slow and complementary penetration of imported flexible LNG was expected. However, none of the above happened and everything indicates that we are on the way to import huge quantities of LNG throughout the Southern Cone, mainly to Brazil.
As we all know, the natural gas market in Brazil is undergoing a profound and advanced reform in order to leave behind Petrobras’s monopoly in the whole chain, which was devastating for the high prices paid by end users. For this reason, companies demanding gas in Brazil are looking for domestic production supply (mainly offshore), imports from Bolivia, LNG and why not consider natural gas imports from Argentina https://www.bnamericas.com/es/opinion/integracion-gas-natural-de-vaca-muerta-a-brasil-por-bolivia.
Natural gas production in Bolivia, as we all know, is in sharp decline and the scarce conventional exploration has not yielded the expected results. Bolivia’s natural gas supply will no longer be available as in the past for Brazil and that gas must be replaced from somewhere. This leaves Bolivia’s pipelines with increasingly idle capacity to reach from the border with Argentina to the border with Brazil. And it also leaves the TBG pipeline on the Brazilian side with idle capacity that if not used will be reversed.
All this unused capacity should and can be used. Moreover, subway storage in Bolivia can be considered to optimize the oscillations and seasonality of production and demand. That is to say, peak demand in winter in Argentina and low season in Brazil. A true gas integration project using existing and idle infrastructure.
The optimal alternative is that the gas already discovered (shale) in Vaca Muerta (with efficient exploitation and scale can achieve very low production costs as has already been demonstrated) and reach the large Brazilian market. Not to forget that natural gas production in northeastern Argentina is also in sharp decline and depends on Bolivia’s declining production. Therefore, sooner or later companies in Argentina will have to reverse with marginal investments the TGN pipeline to supply northern Argentina and thus reach the Bolivian border.
Meanwhile Bolivia could improve its legislation and achieve greater exploration to bring out resources that are under the ground later on. Argentina’s gas can flow from Bolivia without any problem to the large and growing market of Brazil, why wait, and if we don’t do this, will we have to import via LNG a large part of Brazil’s demand?
What estimated losses would this have for the Southern Cone? These would go to the countries that export and transport LNG. A quick analysis for a competitive gas in Sao Paulo of between 6 to 7 USD/MMBTU to compete with imported LNG indicates that the Southern Cone would lose the following revenues between 2023 and 2033. Argentina gas production: USD 5,600 MM. Gas transportation Argentina: USD 3,500 MM. Gas transportation Bolivia: USD 1,500 MM. Gas transportation TBG Brazil: USD 1,650 MM. For a total of US$12,250 MM. Wouldn’t it be handing these resources on a silver platter to LNG and that the TBG will soon revert?
*Former Minister of Hydrocarbons of Bolivia and current Managing Partner of Gas Energy Latin America.