Phase 2 of Vaca Muerta duct key to substitution of Bolivia gas imports

Besides carrying out pipeline flow-reversal work, Argentina will need to build the second phase of the Vaca Muerta gas pipeline in order to replace imports of Bolivian gas year-round, investors were told.

State energy company Energía Argentina has built the first phase of the Vaca Muerta duct – designed to ease a dispatch bottleneck in the Neuquén basin – and the second phase of the flow-reversal project, targeting transporter TGN’s north-south infrastructure, is due to be completed around the middle of 2024.

With these two projects built, Argentina would be able to substitute 3-4Mm3/d (million cubic meters per day) from Bolivia during the warmer months of the year.

“The only way to increase, really, the output from Neuquén into the north region is with the construction of the second tranche of the gasoducto Néstor Kircher [Vaca Muerta pipeline],” Horacio Turri, executive director for oil and gas at local hydrocarbons and electricity company Pampa Energía, told the firm’s 3Q23 results call.

Energía Argentina recently launched a pipe supply and financing tender for the second phase of the Vaca Muerta duct.

Completion of all three-phases of the flow-reversal project, meanwhile, would allow for an estimated 29Mm3/d to be piped north.

Turri said it was nevertheless important to renegotiate contracts with Bolivia, whose output is declining but which will still have spare gas in warmer periods.

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A supply auction linked to the flow-reversal project is expected in Argentina, but it was “difficult to say when that auction will take place and what’s going to be the amount,” Turri said.  

LNG

Pampa expects, by 2028, higher exports to Brazil and Chile and that an LNG plant will be under construction. Pampa unit TGS said on Thursday that a chunk of its US$600mn cash pot was earmarked for LNG liquefaction investment. 

Much hinges on construction of the second phase of the Vaca Muerta duct, which would require about US$3bn and roughly double dispatch capacity from the Neuquén basin and support growth in firm year-round exports.

PROJECTS, AUCTIONS

The first and second phases – for a total of 140MW – of Pampa wind power project Pepe VI are due to be completed next year. Pampa aims to eventually expand the park to 300MW. Pepe VI targets the Mater term market, where the likes of manufacturers ink private power-purchase agreements with renewables generators. 

Citing transmission congestion, Pampa investor relations officer Lida Wang said the scope for further renewables projects was limited. Wang said that following completion of Pepe VI, the company was “not doing more.” Pampa “would love to do more but today we’re restrained,” she added.

Argentina’s 2035 national electric power transport plan involves the construction of 11,800km of lines and installation of 16,000MVA of transformer capacity. Total estimated required outlay under the plan is US$9.9bn, the bulk corresponding to 500kV work. Argentina faces a multibillion-dollar transmission shortfall. The cash-strapped government has asked the private sector to submit expressions of interest in carrying out 500kV transmission work.

Fellow generator YPF Luz said this week that it may consider carrying out grid work to support the addition of new capacity. Mater project developers can seek authorization to carry out expansion projects that boost transmission priority dispatch capacity. 

Elsewhere on the power generation map, Pampa was waiting for award decisions in the TerCONF thermoelectric power supply auction, Wang said. Pampa offered two projects. One involves 300MW of gas turbine capacity at its 1.25GW Buenos Aires combined-cycle plant Genelba, at a price of US$19,800/MW a month. The other an 11MW combined-cycle expansion at the 848GW Ensenada Barragán plant in Buenos Aires, at a price of US$9,000/MW a month.

Auction winners will sign supply contracts with wholesale power market administrator Cammesa. 

PRODUCTION

Gas 

Gas-focused Pampa achieved record gas production, of 16.4Mm3/d in 3Q23, up 44% year-on-year, stemming from government supply contract commitments under Plan Gas. The company exported 5% of gas production in Q3 to Chile, a results statement said.

Average gas price obtained was US$4.70/MMBTU (million British thermal units), down from US$4.80/MMBTU a year earlier.

Flagship block El Mangrullo accounted for 58% of output, followed by Sierra Chata with 26%, both in the Neuquén basin.

Oil

Pampa, which is working on a plan to expand its oil footprint, posted production of 4,700b/d in Q3, compared with 5,500b/d a year earlier, citing a drop of 900b/d at license El Tordillo due to its natural depletion, partially offset by higher output at licenses Río Neuquén, Gobernador Ayala and Los Blancos. Pampa has previously said it was mulling the purchase of ExxonMobil shale assets. 

Pampa’s growth vehicle is Vaca Muerta block Rincón de Aranda. This year Pampa became the sole owner of the rights to the 59,154-acre exploration license, under an asset swap deal with Total Austral.

Drilling and testing work is due to be finished in 1Q24 and Pampa expects to begin injecting into the transport system by mid-2025 to coincide with the completion of midstream expansion work. “That’s when we’re going to be seeing a significant impact on Pampa’s results,” Turri said. Rincón de Aranda output will be constrained by transport capacity, of 900-1,000m3/d (5,660-6,289b/d), the call was told.

FINANCIALS

Pampa posted net income of US$153mn for the quarter, down from US$179mn a year earlier, as revenue fell to US$474mn from US$507mn.