Beyond the tension between Lula and Milei, in Brazil they hope that companies activate projects to bring gas from Vaca Muerta

Beyond the tension between Lula and Milei, in Brazil they hope that companies activate projects to bring gas from Vaca Muerta
Beyond the tension between Lula and Milei, in Brazil they hope that companies activate projects to bring gas from Vaca Muerta

The governments of Argentina and Brazil and businessmen from the sector have identified three short-term paths for the fluid stored in the Neuquén basin to cross the border to supply the growing industrial demand in southern Brazil (Reuters)

Tensions between Javier Miley e Inácio Lula Da Silva will not be an impediment for Argentine gas from Vaca Muerta to reach Brazil through, primarily, private initiative. That is the premise with which energy entrepreneurs from both countries are working these days.

For Argentina, it would be a unique opportunity to generate foreign currency in the face of a long debt repayment schedule in the coming years and to balance a trade balance that is currently in deficit. For Brazilians, it could mean cheap energy to supply the growing industrial demand in the south and the possibility of producing fertilizers at a competitive price.

In the immediate future, both governments and businessmen in the sector identify three short-term paths for the fluid stored in the Neuquén basin to cross the border to supply the growing industrial demand in southern Brazil:

  1. the sale of Liquefied Natural Gas by sea,
  2. Bolivia’s gas pipeline infrastructure, and
  3. through Uruguay.

These alternatives and others under study are complementary.

Lula and Milei maintain their political differences with strong public attacks.

The Argentine Secretary of Energy, Eduardo Rodriguez Chirillooften says in private that “the issue is to bring together the groom, Vaca Muerta gas, with the bride, Brazil’s demand.” For the CEO of the Brazilian Institute of Petroleum and Gas (IBP), Roberto Furian ArdenghyBolivia will be “the priest” because its infrastructure will allow connecting both ends.

“All Bolivian gas is purchased by Brazil through Gasbol, which has the capacity to transport some 30 million cubic meters per day and is currently at 10 or 12 million cubic meters. Argentina has the possibility of transporting between 18 and 20 million cubic meters in the short term,” explained Furian. Due to the lack of investment in its wells, Bolivia is facing a sharp decline.

Argentina has the possibility of carrying between 18 and 20 million cubic meters in the short term (Furian)

But to achieve this goal, the first stage of the Northern Gas Pipeline Reversal, which will connect the Neuquén basin with seven provinces in northern Argentina to transport 19 million cubic meters, is not enough. However, a second stage is necessary with loops (parallel pipeline) and compressor plants to achieve a minimum surplus of 15 million cubic meters, which would take at least until 2026.

Chirillo’s goal is to have it done with private capital. The president of the IBP commented that the point to be resolved will be the transport tariff that Bolivia intends to charge, which should allow access to Brazil at a competitive price.

“Argentina has the resources, Bolivia has the infrastructure and Brazil has the demand. I believe that the needs of the private sector will overcome political differences,” said Furian.

The Brazilian Minister of Mines and Energy, Alexander Silveira de Oliveira. He said this week to Infobaeduring the inauguration of the 423 MW wind farm PAE in the state of Bahia, that the best route is through Bolivia.

Alternatives for trunk gas pipelines (Enarsa)

Silveira de Oliveira also clarified that the dialogue with the governors of the provinces where Vaca Muerta is located Rolando Figueroafrom Neuquén, and Alberto Weretilneckfrom Río Negro, are predisposed to bilateral dialogue, despite Lula’s bad relationship with Milei, whom he called a “pseudo leader.”

“The two governors had the decency and willingness to meet with us in Rio de Janeiro, together with President Lula, demonstrating their complete and total willingness to engage in dialogue with Brazil on gas. So there will be no political puzzle that will prevent Brazil from continuing to engage in dialogue with its Argentine brothers and sisters,” the minister said. The key for the government of the neighbouring country, he insisted, is energy integration.

There will be no political puzzle that will prevent Brazil from continuing to dialogue with its Argentine brothers and sisters (Silveira de Oliveira)

Next week, the official said, they will travel to Bolivia to meet with local authorities and businessmen with the aim of discussing, among other things, the possibility of Argentine gas passing through their pipelines. For Silveira, that is currently the best option.

Another alternative highlighted by the minister has to do with the ship that PAE and the Norwegian company Golar will put in the Argentine Sea to install a vessel in the country that will allow the export of Vaca Muerta gas starting in 2027. Other players could join in there, such as the state-owned company YPF.

Brazilian Minister of Mines and Energy, Alexandre Silveira de Oliveira (EFE)

The other alternative he mentioned is through the Buenos Aires-Montevideo Gas Pipeline, which transports some 5 million cubic meters. But there is a need to build a pipeline from the Uruguayan capital to Porto Alegre, as well as more compressor plants to expand the capacity of the pipeline.

Argentina has the second largest unconventional natural gas reserve and the fourth largest oil reserve in Vaca Muerta, so the country has the opportunity to take advantage of its resources during the window granted by the energy transition. With the PAE and Golar project, the country will be able to enter the club of LNG exporting nations along with United States, Russia, Qatar and Australia, among others.

For its part, YPF plans to build a liquefaction plant in Argentina together with Malaysian Petronas, which has not yet been confirmed but could become official in the coming weeks, due to the RIGI sanction. The investment there will be for a plant that could increase exports by 2030 by USD 15 billion, according to the state-owned company’s forecasts.

 
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