Pampa Energía ready for Vaca Muerta gas pipeline launch

Argentina’s Pampa Energía has secured permission to export gas on a firm basis to Chile during months when only interruptible dispatches have typically been authorized.  

The company was given the green light to pipe a total of 2.2Mm3/d in May-June, after being granted the right to send an additional 900,000m3/d across the border.

Argentina is working to build a firm year-round gas export industry, partly to secure offtakers for surplus production during warmer months when domestic demand drops. Producer appetites are also being whetted by the prices fetched for their exported gas – typically higher than that obtained under gas production incentive program Plan Gas.

The average price obtained locally by Plan Gas producers over a full year is around US$3.5/MMBTU. In terms of exports of Neuquén basin gas specifically during the May-September cold period, officials have established that producers cannot sell for under US$7.73/MMBTU.

Domestic gas demand in Argentina generally climbs in May-August during the Southern Cone winter.

A pipeline linking the Neuquén basin – home to key Pampa assets – to Chilean demand hub Santiago is close to reaching capacity. Against this backdrop, Pampa’s 1Q23 call was told, other ducts could eventually be used, including in the north, which would require flow-reversal work to permit Vaca Muerta production to be dispatched northward.

Pampa is ramping up gas production at two key blocks in the Vaca Muerta unconventional hydrocarbons formation.

Officials are targeting output of 10.5Mm3/d at El Mangrullo, up from 5.7Mm3/d in 1Q23, and 3.4Mm3/d at Sierra Chata, up from 1.2Mm3/d.

The company expects gas production to climb to 15.6Mm3/d this winter, to help fill the first phase of the Vaca Muerta gas pipeline, which is in the final stage of construction and due to enter service in late June/early July, Pampa upstream chief Horacio Turri, said. “We're ready to deliver the gas,” he added.

Gas-focused Pampa – which also operates in the power generation sector and has several wind power projects underway – has previously said it was working to introduce more oil into the production mix. The company recently bid for acreage at Vaca Muerta.

In terms of weighted average gas prices, the company obtained US$4.0/MMBTU in 1Q23, up from US$3.5/MMBTU in 1Q22. Prices climb over the colder months. 

THERMOELECTRIC SUPPLY AUCTION, WIND CAPACITY

Local media outlet EconoJournal recently reported that Argentina’s government was planning a thermoelectric power supply auction. 

Pampa indicated it would be following the process but that, for now, capex would be pumped chiefly into gas production and its power generation projects. 

“We will be studying these [thermoelectric] projects to see if we can participate at competitive prices,” CFO Nicolás Mindlin told the call.

As well as acquiring the 100MW La Rioja province wind farm Arauco last year for US$170mn, Pampa is part-way through an 81MW, US$128mn Buenos Aires wind farm expansion project, Pepe IV, due to be ready this quarter.

Pampa is also building the first phase of the US$500mn Buenos Aires province wind park Pepe VI, which is expected to eventually have 300MW. This phase involves 94.5MW and has a price tag of US$186mn.  

The first and second phases of Pepe VI are due online by the end of next year. The second stage involves 140MW and the investment is put at US$265mn.