(Reuters, 21.Dec.2021) — Argentina’s President Alberto Fernandez will sign a decree in the next few weeks to push forward construction of a major new gas pipeline system in the country’s huge Vaca Muerta shale formation, a government source told Reuters, a key move to boost gas exports.
The timeline and plans for a decree, previously unreported, come as Argentina seeks to ramp up gas production and exports to bring in much-needed foreign currency to refill depleted reserve levels and amid debt talks with the International Monetary Fund (IMF).
The current pipeline network’s transport capacity is a key obstacle to plans to reduce Argentina’s reliance on energy imports, including expensive liquefied natural gas (LNG).
The project, the first stage of which will take 18 months and an investment of some $1.6 billion, will add transportation capacity of some 24 million cubic meters per day by 2023, said the source, who has direct knowledge of the plans and asked not to be identified.
“What is underway is a DNU (Decree of Necessity and Urgency) that the president will sign where he declares the Néstor Kirchner gas pipeline system of national interest,” the source said.
The person added that, under the decree, the program would be headed by the Ministry of Energy, which will build and seek bids for the pipeline network through IEASA, a public company that manages energy infrastructure projects and works.
The funds are expected to come from the state, despite the rejection of the government’s 2022 budget – which included $482 million to add to $1.1 billion already secured for the project – by Congress earlier this month.
“The absence of the budget bill generates an increase in costs,” the source said, adding, though, that the decree would exempt the project from taxes on bank credits and debits.
Argentina’s energy ministry did not immediately respond to a request for comment.
The first stage of the project includes construction of a gas pipeline from Tratayen, in the province of Neuquen where the Vaca Muerta formation is located, to Salliquelo, in the province of Buenos Aires.
The Vaca Muerta shale formation, which is the size of Belgium, is the world’s fourth-largest shale oil reserve and the second largest for shale gas. State energy company YPF SA (YPFD.BA), Royal Dutch Shell Plc (RDSa.L), Tecpetrol and Pampa Energía SA (PAMP.BA) produce gas in the area.
Analysts and economists have been skeptical about funding for the pipeline development amid tough negotiations with the IMF over a new program to roll over $45 billion in debts Argentina cannot currently pay back.
“Surely the project will be delayed,” said economist Agustín Monteverde from consultancy Massot / Monteverde y Asociados, adding that the government was likely to have to rein in its fiscal deficit in any IMF deal.
“From now on they will have to close some taps, and the easiest to close is capital expenditures.”
Argentina’s Energy Secretary Darío Martínez told Reuters earlier in December that the construction of a second stage of the gas pipeline, in the province of Santa Fe, would later allow an increase in daily gas transport by 40 million cubic meters.
“It will lead us to definitively stop importing LNG and stop burning fuel to generate electricity,” said Martínez, adding that it would be an “important step” in the transition toward cleaner energy sources to mitigate the impact of climate change.
“It would also open the door for us to supply gas to the region: Uruguay, Chile and Brazil.”
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Reporting by Eliana Raszewski; additional reporting by Agustín Geist; Editing by Nicolas Misculin, Adam Jourdan and Jonathan Oatis
