Buenos Aires Weather | Game changer? Argentina calls for tenders for the construction of a huge gas pipeline

Argentina’s government on Thursday launched the tender for the construction phase of a gas pipeline megaproject that will eventually stretch over 1,000 kilometers (621 miles) from the southwestern province of Neuquén to north of Buenos Aires.

If completed, the Gasoducto Néstor Kirchner, or Néstor Kirchner Pipeline, would be the largest natural gas project in Argentina in the past four decades.

Its objective is nothing less than the transformation of Argentina’s fuel transportation capacity for both domestic use and exports. Experts say this could make the country a major energy producer.

The project, however, will take some time, although it comes at a time when global energy costs have skyrocketed due to Russia’s invasion of Ukraine. The call for tenders will be launched in May, with a decision in July. The first stage of the project is expected to cost $1.5 billion, beginning in August and ending in 2024.

During an official ceremony at the YPF Complejo Loma Campana site of the Vaca Muerta deposit in the province of Neuquén, President Fernández celebrated “the start of work to create the Néstor Kirchner pipeline”.

“Gas is the transition energy that the world has decided to have to move towards renewable energies”, he said, declaring that “la vaca muerta is more alive than ever”.

“Today there is a geopolitical situation that allows Argentina to accelerate the development of the energy sector. We are facing an opportunity that requires an increase in the capacity of infrastructures, such as this pipeline”, said said Economy Minister Martin Guzman in a recorded message played at an event.

Fernández, addressing those gathered, said Argentina needed the pipeline “as soon as possible”.

Symbolic – and huge

The first section of Gasducto Néstor Kirchner, named after the late former president who preceded his wife to power, will stretch 558 kilometers from Tratayén, province of Neuquén, to Salliqueló, province of Buenos Aires. This would increase gas supply by 22 million cubic meters per day, the government said.

A second section will extend an additional 467 kilometers north to San Jerónimo. It will allow natural gas to reach the south of the province of Santa Fe, penetrating the main urban and industrial centers of central and northern Argentina, while opening the possibility of exporting to Brazil and the north of Chile.

In total, the new pipeline will increase Argentina’s gas supply by more than 40 million cubic meters per day “supplying urban centers and industry in the center and north of the country and providing the possibility of exporting to Brazil and Chile,” the presidency said in a statement.

“The primary goal of the pipeline is to replace imports, to replace all LNG [liquefied natural gas]and the second is to generate exportable quantities,” said Energy Secretary Darío Martínez, who pointed out that last summer Argentina began exporting gas to Chile for the first time in 15 years, after reversing production declines.

The construction of the Néstor Kirchner gas pipeline has raised great expectations as it represents a further step on the road to sovereignty as a response to the gas supply guarantee for the winter of 2023.

The president’s visit on Thursday coincided with the 10th anniversary of the “nationalization of YPF” in 2012, when Argentina’s Chamber of Deputies approved the law declaring self-sufficiency in fossil fuels a “public utility” and expropriating 51% of YPF oil shares. and gas, under the leadership of then-president Cristina Fernández de Kirchner.

A nod to Fernández de Kichner, its vice-president with whom relations are fraying, the president welcomed her decision to place the energy company “under state management, by signing an agreement with Chevron which few people trusted” .

Thursday’s inauguration brought together senior YPF brass, national and provincial political leaders and energy businessmen, such as Pampa Energía president Marcelo Mindlin, who said his construction company Sacde was ready to participate in the tender. Techint has also confirmed its interest.

“The new pipeline will change Argentina, the province of Neuquén and companies like Pampa, which are ready to invest,” Mindlin told reporters this week.

Vaca Muerta

The Vaca Muerta field contains unconventional gas which is more difficult and more expensive to extract than more conventional natural gas. The site is currently operated by about 20 companies in total, including the state-owned energy company YPF and the American giant Chevron.

The US Department of Energy ranks the Vaca Muerta field, which covers 30,000 square kilometers in Patagonia, as the second largest shale gas reserve in the world and the fourth largest in the world for shale oil.

Extraction from the site has slowed in recent years due to falling crude prices which have made it less profitable due to the high costs of hydraulic fracturing to extract the unconventional gas. Argentina still has to import gas from Bolivia (12 million cubic meters per day in 2021) and LNG to meet its needs.

YPF increased its unconventional gas production from 9 to 18 million cubic meters last year, said Pablo González, the state company’s president. The company will invest a total of $1.6 billion in Vaca Muerta this year for gas and oil production, which it plans to increase by 40%.

Neuquén authorities and Vaca Muerta operators estimate that by 2030 they will be able to extract 140 million cubic meters of gas per day from the region.

In this context, the CEO of Tecpetrol, Ricardo Markous, sketched the future scenario.

“Our estimate is that over the next five years, Argentina should produce 170 million cubic meters of gas, of which 140 million will come from Neuquén and almost a million barrels of oil, of which 750,000 to 800,000 barrels would come from the Neuquén basin.

Neuquén Governor Omar Gutiérrez presented similar production growth projections at a recent conference in Houston, Texas.

The governor maintained that “for 2030, we estimate daily oil production of approximately 700,000 barrels. that is, perhaps tripling current oil production in eight years and also reaching 140 million cubic meters of gas per day.

Gutiérrez indicated that for 2023, Vaca Muerta’s provincial capitalization projections would reach an annual average of 80 million cubic meters of gas while in the case of oil, a historic record daily production of 400,000 barrels is forecast for the end of next year.

Construction

Construction of the pipeline is due to begin in August, when the growing volume of imports during peak consumption months will already begin to be reduced with increased production of unconventional gas from Neuquén. The pipeline is already attracting investment from companies in the sector.

The abundance of unconventional gas in Argentina while lacking the capacity to transport it is considered one of the great paradoxes of the country. The current pipeline system is 40 to 50 years old and becomes saturated during the winter months, a bottleneck that costs billions of dollars a year in imports.

In order to meet peaks in demand during the colder months, Bolivian gas or liquefied natural gas (LNG) via ships is imported at high international prices which have soared in recent months.

Delays, details and disputes

The call for tenders for the construction of the Néstor Kirchner gas pipeline has been delayed for a long time, blocked on such essential details as the definition of the number of work fronts at a time (between one and four) and therefore the number of companies participating to the project, as well as deadlines for companies in the construction sector.

Last week, there was a crossfire of accusations between current and previous officials as to why it took so long to build a piece of infrastructure so essential to Argentina’s energy balance.

On social media, former President Mauricio Macri said he called for a tender towards the end of his government but that the surge in the parallel exchange rate (from 46 to 57 pesos to the dollar) the day after the primaries PASO spooked investors. .

Abandoned by the government of Alberto Fernández on December 30, 2022, the call for tenders was not reactivated until last February, via an emergency decree, when the company Ieasa (ex-Enarsa) obtained a concession to undertake the pipeline as a public work.

“It is this government that has delayed for 26 months work that is obviously important for the development of our country,” said former energy minister Juan José Aranguren.

“Macri was unable to build this much needed pipeline. On the contrary, he designed a call for tenders so fragile that it failed twice, thus delaying these works so important for our energy development,” retorted Martínez.

Ieasa’s formal argument to explain the delay was that he was still working on clarifying technical and engineering details to avoid confusion and thus be able to speed up at a later stage. But the main reason is that the construction companies have still not decided among themselves how they will partition the project and therefore the business opportunities. Time is a key variable because the longer the construction of the pipeline is delayed, the more public funds must be allocated to importing fuel. Finally, last Wednesday was fixed by Ieasa the date of the official presentation of the call for tenders.

The problem of multiple work fronts in order to accelerate the finalization of the project was that there were very few companies with the financial, technological and managerial capacity to register for the tender. On this list are Techint Ingeniería y Construcción, one of the subsidiaries of Paolo Rocca’s holding company, and Sacde, the construction company of Marcelo Mindlin’s Pampa Energía, among the main ones. Other local firms like BTU also have significant expertise in gas transportation. More construction fronts could attract companies like Electroingeniería, Contreras and Cartelone, among others.

The debate is between favoring a more homogeneous development of the whole local construction industry with several fronts versus a greater efficiency of centralization, which could help to conclude the works by next winter, saving millions of LNG and diesel imports into the country.

Those who propose to minimize the fronts argue that this also minimizes the risks, pointing to the case of the Northeast gas pipeline which decided to move forward in several stages at the same time and in 2015 the project was paralyzed when the Vertúa company abandoned the construction of a 230 kilometer stretch between Salta and Formosa, thus causing several years of delay.

The lack of resolution of this problem is what has slowed down the launch of the call for tenders because within the sector, it is agreed that without the definition of these technical details, the project should have already progressed. There was a call for tenders in 2019 with the presentation of four offers which was stillborn.

But the idea remains to speed up the pipeline as much as possible because it will mean an automatic monthly saving of up to a billion dollars currently allocated to the import of alternative fuels.

– TIME/PROFILE

related news

About Mike Stevenson

Check Also

Russian ruble firms at early 2020 levels near 65 against the dollar

One Russian ruble and one euro coins are seen next to a US one dollar …