Argentina greenlights Plan Gas extension, outlines export rules

An Argentine government initiative to extend 2020-24 gas production incentives program Plan Gas to 2028 has advanced.

Under Plan Gas – designed to help spur investment and cover demand – producers bid for contracts to supply distributors and, via wholesale power market administrator Cammesa, electricity generators.   

Officials published a decree Friday that launches the extension process, a subsequent phase of which involves the issuing of auction rules to potential bidders. The federal energy department is tasked with designing the mechanism.

Soledad Lysak, Southern Cone gas chief for France’s TotalEnergies, said such moves that provide visibility for producers were positive, and outlined the importance of striking the right balance in terms of producer opportunities by province and basin. 

“We can’t say much more, as the rules, volumes, ceiling prices have not come out yet,” Lysak told a webinar hosted by Argentine natural gas market trading platform Megsa.

Part of consortium CMA-1, TotalEnergies, via local unit Total Austral, operates five platforms offshore Tierra del Fuego in the Austral basin, typically injecting around 18Mm3/d (million cubic meters per day) into the General San Martín pipeline, which connects the zone to demand hub Buenos Aires province. CMA-1 is building the Fénix project, which involves three wells and a new platform and is expected to produce up to 10Mm3/d from late 2024.

Authorities launched Plan Gas in 2020 with the aim of securing a base of 70Mm3/d to meet priority demand and help ease reliance on expensive imports. 

Officials will need to secure additional supply to fill the first phase of the under-construction Vaca Muerta gas pipeline, which the government wants to enter service mid-2023. Without compression, the first phase is estimated to have capacity of around 10Mm3/d. Officials have previously said the aim was to bring compression online next year, which would double capacity to around 20Mm3/d.

EXPORTS

The decree also covers the sphere of exports, outlining rules for Plan Gas producers that also wish to tap the market, typically more lucrative in terms of price obtained.

Plan Gas participants that met their supply commitments would be given preferential rights to export natural gas or LNG on a firm basis during the warmer months, and potentially, the winter months. Argentina does not have export-scale liquefaction facilities, but developers are mulling several projects. The country has export ducts to Chile, Uruguay and Brazil.

The federal energy department will establish quotas or maximum volumes, based on supply and demand estimates, according to details in a document attached to the decree. Officials will assign firm export quotas to each basin, outlining a quota-sharing mechanism to be used in the event a basin or basins are granted nil in the first instance because of local supply-demand conditions.  

No single producer would be allowed to export more than 30% of the total export allocation or the equivalent of more than 50% of their production commitments under Plan Gas.  

In terms of firm exports in the warm weather season of 2023-24 production hubs Austral basin and the Neuquén basin will be granted priority dispatch of 2Mm3/d and 4Mm3/d, respectively.

Argentine producers in the Neuquén basin have been ramping up exports to Chile. The duct that connects the basin’s Vaca Muerta formation to Santiago Metropolitan region – GasAndes – has maximum capacity of around 9Mm3/d, on account of available capacity of feeder infrastructure. 

Exports to Chile via the pipeline climbed 552% year-on-year to 6.46Mm3/d in September, compared with almost 800% in August, according to data from gas regulator Enargas. 

Gas production in Argentina was 141Mm3/d in August, up 5.6% year-on-year, according to data from think tank the General Mosconi energy institute. Unconventional gas – shale and tight – accounted for 80.2Mm3/d, up 18.0%.

Amid domestic gas dispatch restrictions, which the under-construction Vaca Muerta pipeline would help ease, producers have been sharpening their focus on the export market. Argentina’s surplus production tends to climb in the warmer months, when domestic demand slackens. 

Unlocking private sector LNG investment may require increased macroeconomic stability, ironclad certainty over long-term gas supply, and an associated regulatory framework that dangles the right carrots.  

The decree and annex are available here.