The ambitious plan for the massive development of Vaca Muerta

The potential of Vaca Muerta is indisputable, But achieving mbadive development involves the deployment of a plan of action to permanently change Argentina's energy production. Until 2015, the goal was to achieve self-sufficiency, but in the last three and a half years it was possible to produce to export the surpluses. Now, in the same industry, they propose that the goal is to produce to export. Panamanian oil sources say energy "We must adopt a new paradigm and move from what we have today, namely export surplus production, produce to export". What appears to be a subtle semantic difference is in fact a change that makes the difference between continuing to underutilize Vaca Muerta or resolutely advancing in an intense development of shale that places Argentina in the place of the major suppliers of the international market. .

Steps

In May, gas production increased by 7.6% over the same month of the previous year, reaching its highest level since July 2009. In the case of oil, production increased by 4.2 % and it's increased by 15%. month of uninterrupted growth from one year to the next, according to data from the Ministry of Energy. These increases are attributable to the growth of Vaca Muerta's unconventional production.

The growth of production, supported by shale, allowed us to resume gas exports to Chile at the end of 2018, something that had not happened since 2007. Under the "interruptible" contracts, during the first three months In this month, Argentina exported an average of nearly 6 million m3 / day, which in March reached a maximum of 9.6 million in one day.

Sources in the oil industry explained that "The next step is to move to business contracts outside of the winter to give more certainty to production". In this sense, the Ministry of Energy is putting in place a mechanism allowing companies to sign firm sales contracts between September 15 and May 15, guaranteeing a national supply through alternative fuels during periods of high consumption. The target for the 2019/2020 period is to offer 7 million m3 / day, volume that will be adjusted each year. Gustavo Lopetegui, from the Ministry of Energy, believes that the increased demand for gas over the 8 months of "winterless month" helps to increase production and reduce the need to resort to imports in winter. In other words, the increase in production makes it possible to export and, consequently, to reduce imports, which definitively translates into the country's trade balance. Not less, taking into account that between 2006 and 2013, Argentina went from a $ 6.1 billion commercial energy surplus to a deficit of US $ 6.9 billion. .

Last year, the red rose to 2.3 billion US dollars. This year, the government plans to move closer to balance. Once the country is consolidated as a gas supplier for Chile and the countries of the region, the Ministry of Energy and the private sector propose, in a second phase, to achieve firm exports throughout the year. # 39; year.

Go out into the world

Once domestic market coverage and supply to the countries of the region have been achieved, the third stage of Argentina is supplying the global market for liquefied natural gas (LNG). The world is increasingly moving towards renewable energies, and in the debate on climate change, LNG is emerging as the cleanest energy to use as a bridge between non-renewable and renewable energies.

In this sense, Argentina already has a potential market in Asia. First, because of the complementarity of the opposite hemisphere to Asian countries in terms of weather stations. Secondly, China is replacing coal with gas, which is a huge demand.

At present, the restricted club of LNG producers only comprises 20 countries. In order to be able to enter the international LNG market, it is necessary to build a liquefaction plant that allows, by a cooling process at -161º, to convert the natural gas into a liquid state in order to transport it in specially prepared ships. this effect. Then, at the destination, you must go through a regasification facility where it is heated to return it to its natural state for distribution. With a cost of $ 4 million, construction can not be entrusted to a single company.

The first step was taken with the state oil company YPF, which installed in Bahía Blanca a barge performing the liquefaction process and a treatment capacity of 2.5 Mm3 / day. The oil company has already made a first export of LNG with a shipment purchased by an international trader. The intention is to start from September, when the peak of winter consumption in Argentina will come to an end, with systematic production and export of LNG to the world, albeit in these small volumes.

Times are against the clock. There are 5 projects in the world that account for up to 5 times the future gas demand in the world, and the construction of a liquefaction plant takes about 4 years from the time of l & # 39; attribution. That is to say, that it was awarded in 2020, it could only go into production in 2024. The government and the private sector agree that LNG must to be exported to the world. "Many economies will stop using coal and start consuming gas, with which there is a historic opportunity to significantly increase the demand for gas. You can not wait 20 years, if it is not done in the next 5 years, the train will pbad and there will be wind turbines, "said an industry executive.

As part of this action plan, YPF is already working on the project engineering of a liquefaction plant in the Bahía Blanca port. Sources at YPF explained that "the large-scale liquefaction plant could be built in a modular way so that it can be expanded over time and increase production capacity." The idea of ​​an expandable plant would involve an intermediate stage of LNG production before reaching a 100% capacity.

At YPF, they hope that by the end of the year or at the beginning of 2020, they will be able to present the project to the entire sector in order to find partners wishing to join the new LNG export company.

Of course, for the project to succeed, the construction of the factory is not enough. A central aspect is price competitiveness. According to market estimates, to be viable, Argentina must reach a selling price of 3 million USD. An industry source said, "The construction of a liquefaction plant of 5 million tonnes per year, which would represent about 18.5 million m3 per day of production, should be addressed by several players in the sector. For this to thrive, it should be accompanied by a series of investments allowing Argentina to continue to increase its own gas production and transport capacity. " From Pan American Energy, they said that "there is a need to improve costs. We are moving towards an export model and for that we have to compete with the world. Vaca Muerta's challenge is to be able to develop its resources on a large scale, continuously and in the long term, and for that we must be competitive. "

In this regard, the industry has taken as good news the government's tender for the construction of a gas pipeline linking the Neuquén Basin to Greater Buenos Aires and the coast. The construction of the first stage of the pipeline will increase the evacuation capacity of the gas produced at Vaca Muerta by 15 million m3 per day. The government's goal is that the construction of the first phase of the pipeline be completed in the winter of 2021, which will replace the liquefied natural gas (LNG), which always enters through the port. Escobar, for a national production of about 240 USD. million a year.

Industry sources have estimated that "the LNG project must be a state affair that is not tied to an election result. Oil companies are investing millions of dollars and we need predictability because they are medium and long-term projects. "

For Vaca Muerta to become definitively a "country project", Upstream investments must continue to grow and allow more service, infrastructure and logistics companies to partnerto make the supply chain more efficient and to obtain internationally competitive production prices.

Once again, Argentina is facing a historic opportunity. Time will tell if politics, national and provincial governments, the private sector and unions are ready to forever change the country's future.