Tecpetrol, industry peers set out how Argentina can unleash gas potential

Argentina must act now to leverage the country’s huge natural gas resources, according to No. 1 shale producer Tecpetrol and other sector players.

Hydrocarbons-rich Argentina could become a regional energy hub and, potentially, an exporter of LNG to the rest of the world. But there are hurdles, sector officials said during Gas Day, an industry event organized by media outlet EconoJournal.

Tackling them today – not tomorrow – is paramount as the world begins the clean energy transition, in which natural gas will play a key supporting role, they said.

Argentina is home to Vaca Muerta, a mega-deposit of non-conventional hydrocarbons, which are accounting for a growing share of national output.

Leopoldo Macchia, commercial director at Tecpetrol, said that, along with clear and stable rules of the game, three areas need addressing.

DEMAND SPIKES

One is first covering domestic demand spikes in winter, when consumption is around 50% higher than in warmer months and LNG is imported to help make up the supply shortfall.

MIDSTREAM

Another challenge is boosting midstream transport and storage capacity via pipeline network expansions and the use of depleted gas deposits.

Tecpetrol – which produced 283Mm3 (million cubic meters) of shale gas in April – has a storage project underway and plans to bring it online in 2023, while pipeline capacity between Vaca Muerta and demand hub Buenos Aires is forecast to be fully utilized next winter.

“We continue investing in wells but there is no way to dispatch it. Investment is needed,” Macchia said. 

A Vaca Muerta pipeline project was put on hold amid the economic turbulence rattling the country, which has dampened investor appetite and crimped access to financing.

Rodolfo Freyre, VP of gas at Pan American Energy, said the country was used to such scenarios and must be “creative” in terms of driving projects forward, adding that projects were getting build.

Freyre said public-private collaboration – involving the government, producers and the likes of construction firms – was key.

SECURING DEMAND

Meanwhile, securing demand is also part of the jigsaw puzzle, Macchia said. Chile, currently in the process of retiring coal-fired power stations, is a target market, as is Brazil. 

“Working on demand, not only locally but also regionally,” Macchia said. “We must become a regional gas hub before leaping to large-scale development of LNG exports.”

Patricio Da Ré, strategy and business development manager at YPF, echoed this.

Along with an ongoing focus on cost-reduction work, the next step at Vaca Muerta involves securing export markets, he said.

“To take a stride forward in supply and production involves generating demand,” Da Ré said, adding that this would pave the way for associated industrial and LNG export projects.  

Da Ré also referred to the need for public-private collaboration, in the sphere of generating investment and building regulatory frameworks for storage and exports.  

“This, I believe, is where we need to work to make the leap in production at Vaca Muerta that we’re seeking,” Da Ré said.

Tomás Magliano, E&P commercial director at Pampa Energía, said proving to potential importers that the country can provide steady supply over the long-term was critical.

Currently, Argentina exports gas in the warmer months, when domestic gas demand falls. There are 10 export pipelines connecting Argentina to Brazil, Chile and Uruguay. 

“What Argentina needs to aim for – in the case of Chile – is providing supply 365 days a year,” said Magliano, who joined the chorus of voices urging the country to begin tapping its full potential now. 

LNG

In terms of capex required to export LNG from Vaca Muerta, around US$50bn would be needed, according to a 2019 government estimate. Upstream would account for around US$39bn, pipelines from Neuquén province for US$6.3bn and an LNG plant-terminal for around US$5bn.

Given the current lack of political and economic predictability, development of full-scale projects before 2030 is seen as unlikely, British industry association Oxford Institute for Energy Studies said in a recent report. 

“New projects may happen post-2030 but would entail a risk of stranded assets in light of industry and government pledges for carbon neutrality by 2050,” the report said. “Therefore, Argentina might not become a relevant LNG exporter in this decade but it will continue to play a significant role as a regional seasonal exporter through its existing infrastructure of exporting pipelines.”