How Chile may ease Argentina’s gas dispatch headache

Three pipelines that dispatch natural gas from Argentina’s Neuquina basin to domestic demand hubs in Buenos Aires province have minimal or no spare capacity.

So reads a sector report produced by Argentina’s national exploration and production division, with input from federal gas regulator Enargas, energy planning unit SSPE and national transport and infrastructure department DNTel.

“In 2021, restrictions on gas transport from the Neuquina basin increased,” the report said, adding that this will dampen output growth prospects.

Neuquina gas output, chiefly from the Vaca Muerta shale play, has been trending up, with government incentives program Plan Gas whetting the appetites of upstream companies. Basin production has reached around 89Mm3/d (million cubic meters per day), with state oil and gas company YPF accounting for around 40% of this output.

Meanwhile, the three ducts can carry up to 77Mm3/d: transporter TGN’s Centro Oeste duct can handle 28Mm3/d and fellow player TGS’s Neuba I and Neuba II pipelines 49Mm3/d.

The government wants to build new Neuquina basin dispatch infrastructure to boost transport capacity, with the chief objective of substituting costly LNG and diesel imports, as the country's gas industry does not meet domestic demand during the colder months.

According to Enargas, Argentine gas imports this year spiked at 53.4Mm3/d on July 18. Bolivian imports accounted for 18.2Mm3/d, the Bahía Blanca LNG import terminal 15.6Mm3/d, and the Escobar LNG import terminal 19.6Mm3/d. Argentine gas imports averaged 23.5Mm3/d last year, up from 18.7Mm3/d in 2019.

Associated goals of the infrastructure build-out push are boosting exports and easing reliance on dwindling imports from Bolivia, with which Argentina is in contract renewal talks, local media outlet Río Negro reported. 

With a supply glut in the warmer months and in the absence of new domestic dispatch capacity – which the government wants to commission around mid-2023, a challenging goal given economic headwinds – officials are looking west to Chile.

CHILE

An LNG importer, Chile also buys piped natural gas from Argentina.

The report, citing DNTel, concludes “there is no possibility of expanding transport systems in the short term, and consequently the alternative of exporting to the Republic of Chile is the only possibility, for the warmer seasons of 2022, of dispatching the growing output form the Neuquina basin.”

Argentine upstream company Pampa Energía has already indicated Chile was blinking brightly on its radar.

“After the growth that we will have in 2022, and until new infrastructure is built, the only chance to continue growing, as I said, is through exports to Chile, increasing our market share of exports to Chile,” Pampa CEO Gustavo Mariani said during the company’s last results call.

Two pipelines export Argentine gas from the Neuquina basin area to Chile: GasAndes (459km, around 9Mm3/d) and Del Pacífico (527km, around 5Mm3/d).

This week the government’s energy chief, Darío Martínez, said that officials had authorized 11 firm export requests for the period from January 1 to April 30, with maximum volume of 4.23Mm3/d. These correspond to YPF, Total, Vista Oil & Gas, Pampa Energía and Tecpetrol. The average contract price for January-April exports is US$5.03MBTU (million British thermal units). Buyers are generators and traders.

This follows earlier authorization of 6Mm3/d in firm export requests.

Martínez indicated a desire to strengthen links.

“Argentine gas production is on the rise, and growing exports are positive signs to consolidate energy integration with Chile, generating jobs for the producing regions and an increase in activity,” Martínez said in a statement.

He added that gas exports to Chile from October 2021 to April 2022 will bring around US$200mn in foreign currency into the cash-strapped country. 

The report, meanwhile, touches on the topic of Argentina’s foreign reserves and the pressure that winter fuel imports places on these.

“Considering both the projections of increasing demand and bottlenecks that limit the expansion of supply beyond levels close to the current ones, this results in foreign exchange requirements to pay for imports of LNG and liquid fuels that supply demand in periods of peak demand,” it said.

Boosting exports to neighbor Brazil would require new infrastructure.

A project is also underway to bring an Argentina-Chile oil pipeline back online next year, amid growing Argentine oil production as well as domestic oil transport capacity restrictions.