In little more than a decade, our country has moved from being a net gas importer, which caused an impact on the chronic deficit of the energy trade balance , to becoming a gas exporter in seasonal periods as well as exploring for the first time the international market as a supplier of Liquefied Natural Gas (LNG). This transformation is mainly caused by the rebound of the gas production in Neuquén Basin, as of the exploitation of reserves located in the non-conventional hydrocarbons formations. “The current levels of shale (shale gas) of Vaca Muerta and the tight (compact sandstones gas),in exploration and development, are enough to meet the domestic demand in the next 30 years and develop additional LNG projects, generation and gas exports”, stated The Technical Manager of Oil and Gas Argentine Institute, Eduardo Abriata, in February during a lecture given at the Industrial Union of Bahía Blanca.
This optimism is also reflected in the plans that were circulated by the Secretary of Energy of the Nation in the last months. In a document issued by the ex-secretary Javier Iguacel in August 2018, the Government outlines that one of the objectives is “to double the gas production in 5 years’time, reaching 260 millions of cubic meters (MMm3) per day and exporting 100 MMm3 per day”. At present, the first goal, that was to reverse the critical situation of our energy trade balance was achieved in the first half of this year. It is stated by the Argentine Institute of Energy General Mosconi (AIE) in its report of Energy Tendencies of last June :”The first five months of 2019 show an energy commercial surplus of 51 million dollars , due to a significant fall in the energy imports of this period and a moderate increase of the exports”
Neuquén Basin, at full development
News coming from the Neuquén Basin are very encouraging, as with a 76.83 MMm3 gas production per day, the historic record of September 2005 was surpassed in last June. In annualized terms, the tendency in the last five years shows a steady growth, after the sharp fall registered between 2008 and 2013. The total production of 2018 was 28,383 MMm3 and although it still hasn’t matched the 2008 record (29,581 MMm3), it hasn’t stopped rising since 2014 up to now. The developments in non-conventional deposits, driven by heavy investments from the private sector as well as the price horizon outlined by the Secretary of Energy in the Stimulus Program to the Investments in Gas Developments coming from Non-conventional Reservoirs (Resolution 46/2017 issued by the ex- Ministry of Energy) can largely account for this promising present.
It has to be taken into account that according to the official figures of the Secretary of Energy, at the present moment only 30 % of the total area of Vaca Muerta called “ gas window” is being exploited. The concessions currently in effect cover an area of 3,848 km2, out of a total of 13,008 km2. Actually, Vaca Muerta is the most well-known and publicized non-conventional formation and is associated to the shale gas, whereas the others like Los Molles, Lajas, Punta Rosada, Lotena, Todillo, Sierras Blancas y Mulichinco are connected to the tight gas. In a recent study, the geologist Diego D. Lassalle warns about the fact that “although Vaca Muerta’s shale has larger resources and potential of reserves development (understanding reserves when there is economic exploitation), the tight reservoirs are the ones of best production and economy”.
Return to the regional market
This strong boost to the gas production has had a series of positive effects both in terms of our own energy self-supply and in the recovery of export markets that had been lost during the last decade after the issue of the Resolution 265/2004 of the Secretary of Energy that determined the suspension of the export of the surplus of natural gas considered “useful for domestic supply”. This measure was repealed by the Resolution 104/2018 that established a new procedure to obtain the authorization to export natural gas, which includes different modalities. Since this norm was issued, more than 50 export operations have been authorized, involving committed volumes between 500,000 and 3.5 millions of m3 per day. They include, among their suppliers, YPF, Total, Pan American Energy (PAE), General Oil Company(GOC), Wintershall, Pluspetrol, ExxonMobil, ENAP Sipetrol and Argentine Energy Integration S.A.( AEISA, state company which is a merger between ENARSA and EBISA). The prevailing destiny is the Chilean market; exports to Brazil and Uruguay have also been authorized, though, but to a lesser extent.
As regards transport infrastructure, the Spanish company Naturgy (ex Natural Gas Fenosa) has enlarged the capacity of the Pacific Gas Pipeline –that connects the Neuquén Basin with the Chilean region of Bío Bío-, going over the original 7.5 to the current 12.5 MMm3 per day. On the other hand, Tecpetrol (Techint Group) inaugurated its own 58 km-gas pipeline last year to connect its “star” block in Vaca Muerta, Fortín de Piedra with the trunk pipeline network of Northern Gas Transporter (NGT) and Southern Gas Transporter (SGT). Meanwhile, the National Government has launched a tender to build a new gas pipeline known as the “Central Gas Transport System”. It will transport gas to the Neuquén Basin until the main consumption centres in the litoral. It will made up of two stages. The first one, about 570 km long, until the Buenos Aires province city of Salliqueló and the second one , 470 km long, from there up to San Nicolás.
From LNG importers to LNG exporters
A larger gas production in the Neuquén Basin has reduced dependence on LNG, that since July 2008 has supplied the domestic market during the winter months of greater demand and it has positioned our country in the select group of gas exporters.
The departure of the regasification vessel from Bahía Blanca port after the end of the agreement with the Belgium company Excelerate Energy and the arrival at the same port terminal of the liquefaction floating unit Caribbean FLNG in February of this current year, have become a symbol of the change of trend.
Tango FLNG, as this floating unit was called, was incorporated by YPF after signing an agreement with the Belgian company Exmar and has become in this way the first floating project of LNG exportation in Latin America and the third at a global level. It has a storage capacity of 16,100 m3 of LNG and a liquefaction capacity of 2.5m3 per day of natural gas. It is a ten-year- agreement between YPF and Exmar. The first export operation took place last June although it is better for these types of sales to have their strong point during the summer months, when domestic consumption is lower and the surplus available for export is higher. YPF’s goal is to export, as of 2020, eight shipments per year and generate revenues of around 200 million dollars per year.
For the time being, the regasification vessel of Excelerate Energy, moored at Escobar port since 2011,will go on supplying the domestic market during the peak winter months until the country has the necessary transport infrastructure to supply the large consumption centres during periods of high gas demand. It was pointed out by YPF that, “Argentina begins to move along a virtuous path where the benefits of gas investments in the last years can be seen and boost future projects. It was pointed out that probably the LNG produced (by the new floating unit) will be transported to the regasification terminal of Escobar and will be used to replace imports of that product during periods of higher demand”
Challenges to become more competitive
In September last year, the Secretary of Energy at that moment, Javier Iguacel, assured with perhaps excessive optimism, that in a ten-year period Argentine energy exports could even surpass those of the rural areas. To achieve this, it is necessary, as Eduardo Abriata, from IAPG pointed out in the lecture previously mentioned – “ to reach the critical mass to develop unconventional gas under competitive conditions ”. Among them, this expert listed : availability of drilling and fracture equipment, better infrastructure of provincial and national roads, new gas pipelines and expansion of the capacity of gas transport and an adequate structure of prices and taxes that could make it possible to compete in costs and profitability at a regional level”.
With the support of predictable public policies and stable rules of the game, the scenario of a self-sufficient country with the possibility of playing again an important role in the regional and international energy market will stop being a mere conjecture to become a tangible reality.
