Argentina’s US$3.5bn gas pipeline project may need private investment

Argentina may need to lean on the private sector to help finance the second phase of its US$3.47bn gas pipeline project, a government official indicated.

A key aim of the overall project is expanding and adapting transport infrastructure to ease a dispatch bottleneck at the Vaca Muerta shale play and bolster supply to central and northern regions, with a view to eventually boosting exports.

Eyeing the public works model, the cash-strapped government has already increased budgetary funds for the first phase, which would require outlay of US$1.57bn. Wealth tax revenue held by state energy company Ieasa and direct treasury financing would also be used, according to local press. 

The estimate for second-phase investment is US$1.91bn.

“You need to always remain open to the possibility of private investment, of course. I think the second phase will have to have an important component of this [private investment],” federal energy department chief Darío Martínez said during a webinar hosted by local media outlet Ámbito. “For this you need to give clear signals. Start with the tender for the first phase, and then have production for that pipeline, which is not insignificant.”

He added that ramping up production to use the new transport capacity would spur additional investment. 

Sean Rooney, CEO of Shell Argentina, said last week that the state needs to play the lead role in advancing large energy infrastructure projects. “The state must have a role in the big projects, such as a pipeline, electricity networks, distribution. They are difficult for the private sector to finance because so much depends on regulated tariffs, the conditions of future governments,” Rooney said during an energy conference hosted by local media outlet EconoJournal.

The first phase would see capacity grow up to 24Mm3/d (million cubic meters per day). Overall transport capacity - considering both phases - would grow by around 44Mm3/d. 

Total domestic pipeline system capacity stands at around 149Mm3/d, British research body Oxford Institute for Energy Studies says in a report.

National gas production averaged 133Mm3/d in September.

Martínez has previously said he wanted to begin the tendering process for first-phase work by year-end and bring the infrastructure into service by winter 2023. The main element is the Presidente Néstor Kirchner duct, which will require US$965mn for the first phase and US$1.58bn for the second. 

FIRST-PHASE WORK

The first phase involves pipeline construction work between Tratayén in Neuquén province and Salliqueló in the province of Buenos Aires (558km). Ancillary projects are included, among them construction of duct Mercedes-Cardales (73km), in Buenos Aires province. This would link Argentina’s northern and southern gas systems. 

Also planned is flow-reversal work on phases I and II of the Gasoducto Norte pipeline and expansion work on other ducts. Flow reversal would permit the transport of gas from the south to the north.

SECOND-PHASE WORK

The second phase would involve laying pipeline between Salliqueló and San Jerónimo in Santa Fé province (484km), further flow reversal work on the Gasoducto Norte pipeline and connection and compression work, including on the partly completed GNEA system.

STOPPING LNG IMPORTS, STEPPING INTO BOLIVIA'S SHOES

Martínez said the initial objective was to stop purchasing foreign shipments of liquified natural gas (LNG), which Argentina currently uses along with other imported fuels over the winter months to meet domestic demand. Stopping imports of liquid fuels would halt, in the first phase, the annual outflow of US$1.47bn in foreign currency and result in fiscal savings of US$1.06bn, according to an energy department presentation. 

A second major goal is taking on the role of regional gas exporter Bolivia. Gas production in Bolivia – which currently pipes the fuel to Argentina and Brazil – has been trending down. Bolivia also supplies Brazil, Peru and Paraguay with liquified petroleum gas (LPG).

“This is a problem that transforms into an opportunity,” Martínez said, citing Brazil, Chile and Uruguay as the export targets. Argentina already pipes gas to the three countries over the warmer months, when it has a supply surplus. 

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