Argentina snares funding for gas infrastructure
Tuesday, Jun 27, 2017
Argentina has secured US$150 million in financing for expanding its natural gas transport capacity, a key for handling rising production from unconventional plays like Vaca Muerta.

CAF, a multilateral development bank in Latin America, made the credit available for the initiative, the government said last week.

The aim of the project is to connect more homes to the gas grid, helping to reduce consumption of costlier alternatives like liquid petroleum gas (LPG), according to a presidential decree included in the Official Bulletin, the government’s newspaper of record.

The projects include expanding the backbone pipelines in the north and south of the country, and increasing the delivery potential of a line that brings in supplies from Bolivia, source of about 20 mcm per day.

Luis Caputo, the national minister of finance, said the credit – and the country’s relationship with CAF – was important for the growth of the country, especially when the money goes toward infrastructure, "which is a key lever for development."

Argentina will need more pipeline capacity as production recovers from a 10-year low of 113.7 mcm per day in 2014. Production has increased to 122 mcm per day since then. While still short of a record 143 mcm per day, more capacity will be needed as it is widely expected that a series of new projects to develop Vaca Muerta, the country’s biggest shale play, will bring more gas supplies to market. One project alone, by Argentina’s Tecpetrol, is anticipated to reach 10 mcm per day by 2019.

The government has said that gas production, which meets half of national energy needs, should reach 185 mcm per day in 2025, meaning that more pipeline capacity will be needed.

In May, the government called a tender for projects to expand three pipelines, with spending estimated at a total of US$168 million. The lines are operating at full capacity, limiting the chance of adding new consumers for gas.

Pipeline operators had been reluctant to add capacity during the rule of the populist regime that was in power from 2003-15 because price caps had made it unviable. However, the conservative government of President Mauricio Macri, who took power in 2015, has raised transport tariffs, providing additional cash flow and borrowing capacity for transport companies to take on new projects.

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