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Argentina's government launched the tender for the construction phase of a gas pipeline megaproject that will eventually extend more than 1,000 kilometres (621 miles), running from the southwest province of Neuquén to north of Buenos Aires which will make Argentina a major energy producer and exporter of gas.
The project comes at a time when worldwide energy costs have shot up due to Russia's invasion of Ukraine. The tender will be launched in May, with a decision due in July. The first stage of the project is due to cost US$1.5 billion, beginning in August and ending in 2024.
Today there is a geopolitical situation that makes it possible for Argentina to accelerate the development of the energy sector. The country faces an opportunity that requires increasing infrastructure capacity.
The first section of the Gasoducto Néstor Kirchner, named after the late former president who preceded his wife in office, will extend 558 kilometres from Tratayén, Neuquén Province to Salliqueló, Buenos Aires Province. It would increase gas supply by 22 million cubic meters a day.
A second section will extend another 467 kilometres northwards, reaching San Jerónimo in the south of the province of Santa Fe supplying major urban and industrial centers of Central and Northern Argentina, as well as opening up the possibility of exporting to Brazil and Northern Chile.
The first objective of the pipeline is to replace imports of LNG (liquefied natural gas), and the second is to generate exportable amounts. Last summer Argentina already began exporting gas to Chile for the first time in 15 years, having reversed falls in production.
Pampa Energía construction company Sacde is prepared to participate in the tender. Techint have also confirmed their interest.
The Vaca Muerta deposit holds unconventional gas which is harder and more expensive to extract than more conventional natural gas. The site is currently being exploited by around 20 firms in total, including state energy firm YPF and US giant Chevron.
The US Department of Energy rates the Vaca Muerta field, which extends over 30,000 square kilometres in Patagonia, as the world's second-largest shale gas reserve, and fourth in the world for shale oil.
Extraction from the site has slowed down in recent years due to the fall in the price of crude which made it less profitable due to the high costs of hydraulic fracturing to extract unconventional gas. Argentina must still import gas from Bolivia (12 million cubic metres per day in 2021) and LNG to meet its needs.
YPF increased its unconventional gas production from nine to 18 million cubic metres last year. The company will be investing a total US$1.6 billion in Vaca Muerta this year for both gas and oil production, which it plans to increase by 40 percent.
Neuquén authorities and Vaca Muerta operators estimate that by 2030 they will be able to extract 140 million cubic metres of gas daily from the region.
In the next five years Argentina should be producing 170 million cubic meters of gas with 140 million coming from Neuquén and almost a million barrels of oil, of which 750,000-800,000 barrels would come from the Neuquén Basin. For 2030 Argentina estimates a daily oil production of approximately 700,000 barrels. i.e. possibly tripling current oil production in eight years and also reaching a daily 140 million cubic metres of gas.
Construction
Construction on the pipeline is due to start this August, from which point the growing volume of imports in months of high consumption will already start to be cut with the greater production of unconventional gas from Neuquén. The pipeline is already drawing investments from companies in the sector.
Argentina’s abundance of unconventional gas while lacking the capacity to transport it is considered to be one of the country’s great paradoxes. The current system of gas pipelines dates back between 40 and 50 years and becomes saturated in winter months, a bottleneck costing billions of dollars a year in imports.
In order to meet peak demand in the coldest months, Bolivian gas or liquefied natural gas (LNG) via ships is imported at high international prices which have soared in recent months.
The tender for the construction of the Néstor Kirchner gas pipeline was long delayed, stuck on such key details as defining the number of work fronts at a time (between one and four) and hence the number of companies participating in the project, as well as the deadlines for the companies in the construction sector.
IEASA’s formal argument for explaining the delay was that it was still working on clarifying the technical and engineering details to avoid confusion and thus be able to accelerate at a later stage. Yet the main reason is that the construction companies still have not decided among themselves how they are going to partition the project and hence the business opportunities. Time is a key variable because the more the construction of the pipeline is delayed, the more state funds must be allocated to importing fuel.
The problem with multiple work fronts in order to accelerate the finalisation of the project was that there are very few companies with the financial, technological and managerial capacity to register for the tender. On that list figure Techint Ingeniería y Construcción, one of the subsidiaries of Paolo Rocca’s holding, and Sacde, the construction company owned by Marcelo Mindlin’s Pampa Energía, among the main ones. Other local firms like BTU also have marked expertise in the area of gas transportation. More construction fronts could bring in companies like Electroingeniería, Contreras and Cartelone, among others.
The debate is between favoring a more even development of the whole local construction industry with multiple fronts versus the greater efficiency of centralization, which could help the works to be concluded by next winter, thus saving the country millions in LNG and diesel imports.
Those who propose minimizing the fronts argue that this also minimizes the risks, pointing to the case of the Northeastern pipeline which decided to advance with various stages at once and in 2015 the project was paralysed when the Vertúa company abandoned the construction of a 230-kilometre stretch between Salta and Formosa, thus causing several years of delay.
The lack of resolution of this issue is what has put the brakes on launching the tender because within the sector there is agreement that without the definition of these technical details, the project should already have advanced. There was a tender in 2019 with the presentation of four offers which was stillborn.
But the idea is to accelerate 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 substitute fuels.
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