February 2023 – @alvaroriosroca – During the recent Celac (Buenos Aires), a series of natural gas integration announcements were made to reach from Argentina to Brazil. Let us make some specific remarks in this regard.
The Neuquén basin in Argentina, with the help of unconventional hydrocarbons, has proven excellent results in terms of efficiency and low production costs. Several pilot wells already drilled show the potential of the resource and there are projects developed and under development with massive factory drilling of both oil and natural gas.
This is happening while all other conventional hydrocarbon basins are declining rapidly in reserves and production. Big difference: unconventional hydrocarbons must be discovered (exploratory risk) and unconventional hydrocarbons are basically discovered and must only be produced efficiently.
The problem in Argentina, for natural gas, lies in the fact that the pipelines to evacuate natural gas from Neuquén (Vaca Muerta) to the markets do not exist. The macroeconomy, regulation, frozen tariffs, the exchange rate and other factors do not allow the private sector to invest and finance gas pipelines and compressor stations under methodological tariffs that allow the recovery of CAPEX and OPEX.
Thus, the State had to take out almost non-existent dollars to invest and partially finance the system called Transport.Ar, which has a total investment of around 3,500 to 4,000 MMUSD. Gas producers are anxious for this infrastructure to be completed in order to reach a domestic market (contractualized until 2028) and looking at regional exports with available infrastructure and idle capacity.
The first part of Transport.Ar is the Nestor Kirchner gas pipeline which is under construction between Tratayen and Saliquello and in August/September it will have the capacity to evacuate 11 MMMCD. In the first months of 2024 two compression stations will be ready in these two locations, which will provide a new capacity of another 11 MMMCD, for a total of 22 MMMCD. So far everything has been financed with an approximate state investment of 1,600 MMUSD. With this capacity it will be possible to replace the declining production of other basins and send some more gas to Chile.
There is an additional gas pipeline between Salliquelo and San Jerónimo in the Tranport.ar that requires an investment of approximately 689 MMUSD to transport 17 MMMCD. For this, financing has been requested from the BNDES of Brazil, which is still pending and has already met with some opposition in Brazil. Economic resources had to be obtained for additional infrastructure to complete the Transport.ar and reach the north of Argentina until 2026, when the contract with Bolivia expires.
But the accelerated decline of the fields in Bolivia, the decrease in exports (2022, 2023 and 2024) and the early termination of the contract, has set off all the alarms in Argentina. The early reversion of the TGN has been undertaken with a change of direction of the Tío Pujio and Leones stations and complementary works. This will allow an additional 3 MMMCD to flow from south to north by the beginning of 2024. In order to obtain the financing, it has been necessary to raise TGN’s tariffs with Resolution 17/2023 and to have the resources in time for this emergency work.
In order to stop depending totally on Bolivian gas by 2024, CAF has been requested 540 MMUSD. The Bezley – La Carlota section, construction of the La Carlota – Tío Pujio gas pipeline, reversion of 4 compression stations and other minor works would be reinforced. It is estimated that CAF will have a financing response in March 2024.
Entering the regional issue, let us remember that a number of gas pipelines have been left empty or are becoming semi-empty between Argentina, Chile, Uruguay, Brazil and Bolivia. For natural gas, the evacuation infrastructure is generally the stumbling block to reach the market.
To bring natural gas to the Brazilian market from Neuquén, three options are envisaged. One is LNG. The other is a new pipeline through Uruguayana to Porto Alegre and Sao Paulo with new investments of approximately 1,000 to 2,000 MMUSD on Brazilian soil, depending on the volume and how far you want to go. The third is to use existing infrastructure with idle capacity in Bolivia.
The first two require heavy new investment and much more time. The second requires little additional investment in Argentina and less time. The fundamental thing is that the current governments of the three countries act with intelligence and with an integrating vision (with which we are often bombarded by the media) and formulate regulations and timely articulation so that gas can flow from Neuquén to San Pablo and Cuiba and also to the north of Chile.
*Former Minister of Hydrocarbons of Bolivia and current Partner of Gas Energy Latin America.
