The energy scenario in the Southern Cone has a new paradigm due to two reasons. The sharp drop in Bolivian oil and gas reserves with insufficient exploration to replace new reserves is one reason. The other is the new production scenario of oil and gas from the Vaca Muerta formation.
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Natural gas and oil do not need to be discovered in Vaca Muerta and only need to be produced efficiently, which is what YPF and at least 10 other operators have done. They have proved over a dozen sweet spots with pilot wells that have resulted in very competitive production costs. In addition, production through factory drilling can be brought up quite rapidly as demand and infrastructure becomes available.
On the other hand, Bolivia is close to producing half of what was being produced in 2014 or 2015 in natural gas, condensate, and oil. The few wells that were drilled, mainly by YPFB, were unsuccessful and there is little to be done with two more prospects to be drilled. Private operators with high fiscal systems and the need to subsidise will not venture any more resources into exploration activities. Recently, the Bolivian government announced the need to change the Hydrocarbons Law; however, the results will not change the country’s tendency to soon become an importer of natural gas and other fuels, including liquefied petroleum gas (LPG), which were previously exported to Paraguay, Argentina, Peru, and Brazil.
The bottleneck for natural gas in Argentina is infrastructure. The Néstor Kirchner Gas Pipeline is in its first stage and is almost finished for domestic demand, but they have been replacing conventional production with unconventional production for a long time, without significantly increasing their total national production. The second stage of the pipeline will allow the country to revert the Transportadora de Gas del Norte (TGN) pipeline and reach Bolivia and Northern Chile with close to 29 million m3/d, and the possibility to be looped further.
Then, existing pipelines to Chile and the Bolivian gas pipelines that were built two decades ago can be used to serve a giant market of 60 – 65 million m3/d in Bolivia, Northern Chile, Argentina, and Brazil. Thus, in regards natural gas, the holdups for access to this huge market are TGN reversion, expansion, and reinforcement projects. This would enable for a great regional market, with almost all infrastructure developed and the possibility to develop some gas integration.
But it is not only gas, Argentina is notably increasing production of oil and LPG and can supply all deficit neighbouring countries (Paraguay, Bolivia, Chile, Uruguay, and Brazil). Existing oil lines can be expanded, or tanker trunks can be used.
With competitive natural gas, power generation in combined cycles can also be used to supply the Sothern Cone (Bolivia, Brazil, Uruguay, Chile, and Paraguay), which has an interconnected grid, meaning efficiencies can be gained relatively easy from Argentina.
Now, this is all piped gas to replace Bolivian decline regionally. LNG will still be needed in Brazil to cope with drastic swings in rainfalls. A couple more regasification terminals are expected in this regard and the swing in spot purchases will continue as water is available.
Argentina will reduce LNG purchases from 2024 with the commissioning of the gas pipelines. In the future, there will no longer be the need for the two regasification terminals. One will have to remain in place to deal with winter residential demand for 2024, which strongly influences demand in Argentina.
In Chile, increased natural demand for pipeline gas from Argentina will impact demand for LNG in the years to come. However, the two regasification terminals will remain quite active until regulatory issues are resolved and the transmission lines are built and strengthened in order to allow the movement of renewable energy, mainly solar in the north and wind power in the south, which at the moment cannot be evacuated.
Thus, the Sothern Cone will overall reduce demand for LNG on the average after 2024/2025, making Argentina the new energy supplier for the region.