The paralysis of key infrastructure works in Argentina, especially in the energy sector, is proving extremely costly for the country. This is the case of gas pipelines, whose lack of progress has forced the State to import liquefied natural gas (LNG) at exorbitant prices.
The government’s decision Javier Milei Postponing the work on the reversal of the Northern Gas Pipeline had significant repercussions. This postponement forced Argentina to sign new contracts with Bolivia at very high prices. According to confirmed information, the new addendum to the contract with Bolivia stipulates that Argentina will pay 21 dollars per MBTU (million British thermal units) during September (when last year it was paid between 6 and 9)in contrast to the 4.5 dollars per MBTU paid for gas extracted in Vaca Muerta during the winter and the less than 12 dollars per MBTU for imported LNG.
The price of Bolivian gas is more than four times the cost of local gas, which represents a significant extra cost. The Ministry of Energy recognizes that transferring these costs to rates would be unviable, given that it could have a devastating impact on consumers. Enarsa, the Argentine state energy company, will absorb the extra cost, which will be counted as part of the subsidies from the National Treasury.
The government maintained a policy of setting a single wholesale price for gas. Currently, all households pay an average of USD 3.3 per MBTU, a value that varies depending on the season of the year and the income of consumers. However, costly imports are putting pressure on fiscal targets, with an estimated impact of more than $2 billion.
The North Gasduct, initially planned to import gas from Bolivia, now needs to reverse its flow due to the decline of Bolivian production and the rise of Vaca Muerta. The project includes the construction of 123 kilometers of power lines between Tío Pujio and La Carlota, the expansion of 62 kilometers of the Juana Azurduy Gas Pipeline, and the reversal of the direction of gas injection in several compressor plants.
The work has a budget of 710 million dollars, with partial financing of 540 million through a loan from the CAF (Development Bank of Latin America). The difference of 170 million dollars was expected to be covered with Cammesa funds. However, the work was stopped after the change of government. The key tender was declared void by the new Secretary of Energy, Eduardo Rodríguez Chirilloand although the process was restarted, the works barely began in some sections and other awards were only resolved at the beginning of May.
