Multibillion-dollar projects, energy integration: Takeaways from Argentina’s Midstream & Gas Day

TGS natural gas liquids

Argentine midstream gas player TGS reaffirmed its interest in natural gas liquids production using output from the Vaca Muerta unconventional hydrocarbons formation.

The company has previously said that gas-conditioning infrastructure in Neuquén province could be adapted relatively easily to achieve this goal. 

“We’re constantly analyzing what the best way is to offer the processing service in Vaca Muerta,” TGS CEO Oscar Sardi told industry conference Midstream & Gas Day, hosted by local media outlet EconoJournal.

TGS has an associated US$2.5 billion natural gas liquids project under evaluation. “It’s a huge sum and, of course, needs producers decided on producing liquids,” Sardi said. The project is also geared to processing associated gas.

Producers could be recovering propane, butane and natural gasoline, Sardi said, citing the importance to company plans of the government’s investment-promotion regime, built into the economic reform bill that recently advanced in congress. The bill contains a hydrocarbons section, focused on sector deregulation, export rights and price parity. 

On the bigger picture, Sardi referred to the need for Argentina to first cover domestic gas demand and then sharpen the focus on gas and exports of value-added products.

Natural gas integration with Chile

Chile and Argentina are connected by seven main links, with the bulk of gas today being pumped through the GasAndes duct, which runs between the Neuquén basin and Chile's Metropolitan region, home to capital Santiago.

Santiago Romero Oneto, CEO of GasAndes, said Chilean demand in the central zone of the country was mainly linked to power generation and that offtakers had been absorbing virtually all the offer of Argentine firm supply available.

Romero referred to the impact of Chile’s energy transition drive, which involves eventually having an emissions-free grid. 

“Today, we're very affected by the energy transition highway that Chile is traveling along,” Romero said. 

Chile is advancing “quite fast,” he added. “The incorporation of large solar and wind projects has been displacing thermoelectric generation.”

Some energy ecosystem players cite a role for flexible gas plants that can, when required, be converted to run on sustainable fuels.

“There is [gas] demand but there's a lot of uncertainty,” Romero told delegates.

A study conducted by Chile's natural gas association forecasts that gas demand for generation could tumble by around half within a decade, the audience heard.

Alejandro Larrive, managing director of the Chilean unit of methanol producer Methanex – which has a plant in southern region Magallanes – also participated. 

Larrive said there was space for greater overall integration between the countries.

“There’s a lot of pending work to do to integrate Chile and Argentina,” he said. “There was discussion in a previous panel about mining, energy, infrastructure. I think Argentina generally looks more towards the Atlantic than the Pacific.”

The Chile-Argentina chamber of commerce is working on the integration front, with one objective spurring Argentina's access to fast-growing Pacific markets via Chilean ports.

Methanex uses gas produced locally as well as imported gas from Argentina. 

The company, which transferred two Chilean production trains to the US after Argentina closed the export taps in 2007 amid domestic pressure, can currently take as much as 3Mm3/d from Argentina. This is down from orginal volumes of 10Mm3/d,

Methanex is importing Argentina gas but not during the Southern Cone’s winter, when domestic demand in Argentina spikes.

A goal of Methanex is having robust year-round supply to better utilize the plant’s capacity.

Romero and Larrive cited the importance for Argentina of continuing to rebuild trust in supply security. 

Gas exports

Argentine gas regulator Enargas, in a monthly report, said 9.57Mm/d was exported in April, compared with 9.62Mm3/d in the same month of last year earlier.

The bulk, 9.37Mm3/d, was piped to Chile, chiefly through GasAndes. The balance was dispatched to Uruguay (190,000m3/d via the Cruz del Sur link and 10,000m3/d through the PetroUruguay duct).

In recent developments, the Chilean government authorized exports of gas to northern Argentina, a region impacted by tumbling imports of Bolivian gas and delays in a key midstream project. 

Gas will be dispatched via Chilean power firm Engie Energía’s Norandino duct, which links the Mejillones LNG import terminal in Antofagasta region with Argentina’s Salta province. Engie and Chilean national oil company Enap’s refining unit entered into an agreement under which the latter will export volumes to Argentine state energy company Energía Argentina.

Green methanol

Methanex is experiencing pressure around green methanol, delegates heard. Green methanol is produced by combining green hydrogen and carbon dioxide. 

Referring to the production cost gap between the green and fossil fuel variants, Larrive said: "The reality is that this currently costs four times what conventional methanol costs and the reality is also that clients aren't willing to pay that."

Company officials are analyzing potential markets and costs, but green methanol production is still some way off, he added, citing a role for it as a shipping fuel.

Green methanol projects are planned for Magallanes region, and e-fuels demonstration plant Haru Oni, which uses green methanol, is in operation.  

YPF oil exports 

Argentina’s national oil company YPF this month launched a US$2.5bn tender to build the export-focused Vaca Muerta Sur oil project. 

The project involves building pipeline infrastructure between the Neuquén basin and a planned oil terminal at Punta Colorada, Río Negro province, a zone capable of receiving very large crude carriers and where LNG exports are also envisaged to start.

Officials hope to sign contracts in October-November, start construction next year and launch operations in 2026. 

An objective is working with other producers, YPF infrastructure VP Gustavo Gallino said. The project is for the “country” not just YPF, he said.

Gallino underscored the importance of RIGI, saying the interest in the regime was not so that profits swell, but to ensure that the project is financially feasible.

YPF is ramping up shale oil production, with the export market fixed squarely in its crosshairs.