Argentina’s TGS says US$500mn midstream gas project would tap Rigi regime

Argentine gas transporter TGS indicated that a planned US$500mn capacity expansion project – if given the thumbs up – would be carried out under the federal government’s Rigi investment-promotion regime.

Rigi grants certain tax benefits and exchange control exceptions for 30 years to large projects, over US$200mn, carried out by special purpose vehicles.

The US$500mn TGS initiative, unveiled this year, is one of two designed to increase transport capacity by a total of 14 million cubic meters per day by mid-2026.

The project involves four new compression plants along the Tratayén-Salliqueló stretch – which is the 573km first phase – of the Vaca Muerta pipeline. 

It has been presented to the economy ministry for consideration under the hydrocarbons law and the private initiative model, which would require a tendering process if greenlit.  

Associated project talks between TGS and federal authorities are underway, TGS CFO Alejandro Basso told the company's 2Q24 results call.

Meanwhile, involving US$200mn, the other phase consists of two compression plants and 20km of loops elsewhere on the system and would be carried out by TGS under the terms of its license, with rates denominated in pesos.

Overall, work would bolster local supply and support the exportation of surplus output to neighboring countries, Basso told the call, adding that expansion capex could start flowing in 1Q25.

Given the TGS initiative constitutes complimentary works, it would not, if carried out, necessarily mean a scrapping of a planned second phase of the Vaca Muerta pipeline. According to earlier reports, a tender is expected, to secure a party to finance and build the second phase. Required associated outlay on the second phase between Santa Fe and Buenos Aires provinces is at least US$2.5bn and a previously announced target is to achieve completion in 2026. 

In terms of the LNG project planned by Argentine state-controlled oil firm YPF and Malaysian counterpart Petronas, Basso said TGS could benefit from increased demand for gas and for gas conditioning and other services.

Along with the transportation projects, TGS has a US$2.5bn natural gas liquids project under evaluation. The initiative is also geared to processing associated gas. 

Financials

TGS posted net income of 85.7bn pesos (US$91.6mn) for Q2, up from 45.0bn pesos a year earlier, driven by higher inflows from its core gas transportation operations.

TGS holds 572bn pesos in cash, cash equivalents and other financial assets. This may be tapped to finance projects, the call heard.