April 2022 – Alvaro Rios Roca – It is time for the Southern Cone countries to agree once and for all and understand that it is essential to use the existing gas in the region and the extensive gas pipeline infrastructure built between the countries (Argentina, Bolivia, Brazil, Uruguay and Chile). In that way we would avoid costly LNG imports from the empire and several other countries in the future.
El conflicto en Ucrania ha agravado esta situación y las importaciones de GNL de Brasil, Chile y Argentina están pasando factura a estados, empresas y usuarios finales. Todo indica que el problema europeo del gas natural continuará en los próximos años y por tanto la situación es estructural. No podemos ser tan nostálgicos de seguir importando GNL caro cuando existe gas natural y gran parte de la infraestructura está construida básicamente en todo el Cono Sur.
Let us start with Bolivia. The few exploratory projects have not yielded the desired results and Bolivia’s reserves and production will continue to decline at an accelerated pace. Any new work or exploration campaign will take a long time and is subject to discovery and therefore has no certainty of being realized. This leaves Bolivia with less and less export capacity and with pipelines with idle capacity to transport natural gas to the Brazilian market, which is the most important in the region.
The Brazilian natural gas market continues to reform, albeit at a slow pace. It is difficult to leave behind Petrobras’s crippling monopoly over the entire chain, which has been devastating for competition and prices for end-users. Brazil is the most promising market in terms of demand in the Southern Cone, for which it needs a reliable, diversified and competitive supply.
Brazilian demand companies, under the new scheme, must look for natural gas suppliers and contracts in the short, medium and long term. The options they have are Petrobras production, privately produced gas in Brazil, gas from Bolivia (increasingly scarce), expensive LNG and gas from Argentina, as we will see below.
As we all know, the availability of gas from Argentina is immense. It is gas that is available (due to its shale characteristics) and can be lifted into production very quickly as Tecpetrol demonstrated at Fortín de Piedra. In a way it is already discovered and what is needed is massive drilling of wells to produce it and infrastructure to evacuate it to the domestic market and neighboring countries, and why not export it via LNG to the world.
As we write this article, Argentina has made progress in the purchase of pipes to complete the first phase of construction of natural gas infrastructure, mainly to supply its domestic market and reduce LNG imports until the first half of 2023. Great and blessed progress for the dollars to be saved.
We sincerely believe that Argentina, its institutions and companies should make every effort to complete the second phase by 2024, which will allow it to reach the north of the country. This will free Bolivia to send the scarce volumes it has to the Brazilian market. In addition, it will be able to access the northern Chilean market, which will continue to import LNG.
This second phase is essential for IEASA and YPFB to stop the tedious negotiations that have been going on for two years. A trivial fight in which Bolivia does not have and cannot send the volumes that Argentina needs in the north of the country. On the other hand, it is a poor man’s fight, where Argentina wants to pay low prices to Bolivia, but pays without haggling 40 USD/MMBTU for LNG to the empire’s companies.
The gas infrastructure in Argentina for the two phases has a cost of approximately 3,500 MMUSD. At current prices the investments would pay for themselves immediately and would generate billions in revenues from substituting LNG imports and Bolivia. In addition, it would generate additional dollars from exporting to the northern Chilean market and finally dollars from exporting to the Brazilian market through the empty pipelines in Bolivia.
Using regional gas is an important source of generating taxes, royalties, employment and income from transporting gas through gas pipelines already built with a high degree of depreciation throughout the region. Keeping them empty is the option that should not happen. Will we continue to be nostalgic?
*Former Minister of Hydrocarbons of Bolivia and current Managing Partner of Gas Energy Latin America.