January 2023 – Vaca Muerta is a world-class shale for natural gas and light oil. Not only because of its abundant existing resources, but also because of the productivity that can be obtained in its geological exploitation. Approximately ten Argentine and international companies, led by YPF, have tested several areas (sweetspots) within the shale with complete developments (factory drilling) and with pilot wells for future developments. They are prepared to reach the market competitively.
The results obtained at productivity level and with increasingly lower investment costs are part of the axis of this consolidation. Excellent fusion of geology with the best science and engineering practices.
This allows producers to produce natural gas and oil at low cost, not only to supply their domestic market but also to reach regional and international markets. The contractualization of the domestic natural gas market until 2028 with Plangas has achieved very competitive prices of 3.30 to 3.90 USD/MMBTU at the entrance of the transportation system. In other words, Argentina will enjoy competitive gas for several decades. Let us remember that other countries had to import it via LNG or from Bolivia at prices 3 to 10 times higher. Great savings of dollars in imports
One of the major obstacles to overcome for this long-awaited consolidation in Vaca Muerta was that there were no oil and gas pipelines to evacuate oil and natural gas to the markets. With a less complex macroeconomy, the private sector could have assumed all the role of infrastructure development, which, for the time being, has to be largely assumed by the State, which, as we all know, is very short of dollars.
In several issues during this 2022 we expressed our opinion on this subject and by the end of this year we can say that Vaca Muerta is consolidating as a great supplier and exporter of oil and natural gas. https://energiaadebate.com/argentina-gasoducto-de-la-esperanza-en-su-hora-decisiva/; https://www.paginasiete.bo/opinion/columnistas/gas-argentino-evitara-costoso-gnl-en-la-region-MCPS327579
Two pipelines are being expanded to evacuate oil and liquids from Vaca Muerta by the private sector. The Oldeval and Otasa pipelines will support the evacuation of approximately 800,000 to 850,000 BBL/day to the domestic and export markets by the end of 2024. As a result, an accumulation of foreign currency will begin to flow into the country.
Phase 1 of the construction of the Transportation Gas Pipeline System is already underway and between June and August 2023 it will be possible to evacuate an additional 11 MMMCD. With the compression planned and underway by September and October 2023, an additional 11 MMMCD will be available. A total increase of 22 MMMCD by the end of 2023.
Finally, 689 MMMUSD are being finalized from the BNDS with Brazil for Phase II, which will allow the construction of other gas pipelines with the intention of reaching the north of the country. Additionally, during 2023 and 2024 the reversion of some compression stations of the TGN pipeline in the north of Argentina is foreseen. All this because the supply from the Neuquén basin and from Bolivia is not working. By 2023 it is understood that there will only be around 6 MMMCD for winter delivery to the tango country, unless some magic is done.
The benefits of what has been achieved with Vaca are innumerable, not only for Argentina, but also for the Southern Cone. We can point out:
1) Substitute substantial LNG imports with very high price projections in the coming years. It is estimated that Argentina’s energy balance will show a deficit of around 5,000 million dollars. 2) To replace liquid fuels currently used in thermal power plants with natural gas. 3) Confront the very strong decline of natural gas in the Northwest basin of Argentina and the producing fields of Bolivia, which may also generate shortages.
4) To have the capacity to supply the large consumption centers in Argentina, including the petrochemical complex of Bahía Blanca for its expansion. 5) To make the export of natural gas to neighboring countries (Chile, Uruguay) and Brazil feasible with existing infrastructure in Bolivia and to be able to replace some coal and large imports of LNG in Brazil and Chile. 6) Achieve scale and be able to produce LNG for the domestic market and for regional and world exports, which will be so desirable in the coming years.
7) To generate additional production of oil and liquids associated to natural gas that can be destined to the domestic market and exports, generating important foreign currency. 8) Generate thousands of direct and indirect jobs. 9) Royalty benefits for the producing provinces. 10) We could go on with the list, but there is not enough space.
We can assure that Vaca Muerta is alive, the only thing it needs is for the Argentine government to give clearer signals of compliance with the rules and commitments to attract additional foreign capital. Let’s remember that the results obtained during 2021 and 2022 were without injection of any foreign capital, which is not a minor issue for the mentioned results.
*Former Minister of Hydrocarbons of Bolivia and current managing partner of Gas Energy Latin America.
