Argentina’s No. 1 renewables generator eyeing Vaca Muerta, mining supply opportunities

Hydrocarbons, lithium and copper production decarbonization is blinking on the radar of Argentina’s biggest renewable energy generator Genneia. 

The company is a major player in the local corporate power purchase agreement (PPA) sphere, where demand for clean energy from exporters is expected to continue climbing over the coming years to support carbon competitiveness of their products.

A chief driver is the EU’s Carbon Border Adjustment Mechanism (CBAM), which took effect last year, encompassing goods such as aluminum and fertilizers, and puts a price on the carbon emitted during the production of carbon-intensive goods that enter the bloc. From 2030, crude oil and its derivatives will fall within the scope of CBAM, but not LNG, which Argentina wants to start exporting this decade. 

The EU is, however, due to introduce methane emission rules for imported oil, coal and gas from 2027. Methane is a much more powerful greenhouse gas than CO2.

Associated emissions measuring, monitoring and report work, for contract purposes, is expected to get underway in Argentina, Genneia business development director Gustavo Anbinder told a webinar hosted by Argentine electronic gas market platform Megsa.

Anbinder added that local or regional companies that produce final goods subject to CBAM and purchase Argentine inputs, would also require information about what they are buying.   

“That’s why this matters to us,” Anbinder said. “Those companies that produce crude or its derivatives or produce gas for exportation, that are thinking of the CO2 and methane content of their products – and obviously have a plan for this – are going to have a stronger competitive advantage than those that cannot do it or are not interested in investing in this.”

Along with contracting clean energy, installing electric-powered equipment, developing mitigation plans and spurring operational efficiency are among concrete measures that hydrocarbons sector players can take.

Drillers could obtain a kind of premium for low-carbon oil, with ordinary output directed at markets with no such border mechanisms.  

Argentine hydrocarbons companies are already targeting energy supply and electrifying operations. The country’s second-biggest shale oil producer, Vista Energy, last year inked an agreement with Genneia under which 60% of the former’s electricity will come from clean sources. Vista, which uses pipelines as well as trucks to dispatch output, is aiming to achieve a production rate of 100,000boe/d in 2026, roughly double its current rate.

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Vaca Muerta driller Shell has also inked a clean energy agreement with Genneia, which also has contracts with companies from multiple other sectors, including petrochemicals with firm Petrocuyo, according to data from wholesale power market administrator Cammesa. 

Elsewhere on the hydrocarbons map, midsized player Aconcagua Energía is expanding renewables capacity with the objective of complying with a 20% clean energy requirement for 2025, established in local law 27,191.

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In a 2022 sustainability report, the country's biggest oil producer, state-controlled YPF, said 29.3% of electricity purchased was from renewable sources. YPF, which has a power generation unit, YPF Luz, is betting big on Vaca Muerta. The company aims to more than double shale oil production to 250,000b/d in 2027, with the export market squarely in focus. 

Argentine upstream firms are working to boost exports of crude and start exports of LNG in the latter half of the decade. The focus of investment plans is chiefly Vaca Muerta. 

Building a renewables park at Vaca Muerta, within Neuquén province, would require much coordination between stakeholders and a large plant to achieve the requisite economies of scale, the event was told. 

Genneia, whose installed capacity has passed the 1GW mark, has projects on the drawing board in the province, which does not, however, have optimum resources. “It’s an issue of scale, projects of 100-150MW require combining intentions: it’s not about selling [output] to just one company,” Anbinder said.

Further south, in the likes of Tierra de Fuego, plants would have to be dedicated to projects, given a lack of access to the grid.

President Javier Milei’s revised economic reform bill deregulates the oil and gas sector. An energy section of the draft legislation, along with an investment incentives regime for large projects, was given the thumbs up in the lower house but the bill still needs to get approval in the senate. Milei also proposes establishing a local emissions trading system.

MINING

Argentina has lithium projects looking for clean sources of power to help manage operations.

“There’s no infrastructure where the mining sites are going to be, in particular the zone of the lithium triangle, Puna [region] at 4,000m, against the mountains; it’s totally lacking electrical infrastructure,” Anbinder said. “They have the resources to extract but don’t have the energy to do it.”

Against this backdrop, Genneia is in discussions with producers in Jujuy, Catamarca and Salta provinces, with the goal of bringing multiple players onboard to achieve economies of scale.

The company has developed a grid-connected solution providing clean power 24 hours a day and is gauging industry interest. In contrast, dedicated plants with no grid link would have limited capacity and require some kind of renewables-storage-thermoelectric configuration, likely requiring diesel given the current lack of gas infrastructure, the webinar heard.   

Genneia is also in discussions with copper miners, chiefly in San Juan province, which has some of the biggest copper projects in the world. The company is, again, working on a shared solution.

The government has said flow-reversal work on the Gasoducto Norte pipeline – currently being carried out – would help get Vaca Muerta gas to mining operations in the north.

CHALLENGES

Argentina has a wealth of renewable energy resources, but transmission congestion, particularly at nodes with the best wind and solar energy, is creating headwinds for continued development of the private PPA market. A challenge is getting new lines financed and built in the cash-strapped country.

Developers are having to target zones with less than optimum resources and land. 

Overall, a transmission buildout, along with access to financing at favorable rates, could help accelerate investment in new renewables parks. 

Generators are interested in investing, but cast-iron legal certainty over investment recovery and usage of the assets would be needed, the webinar was told.

One renewables company told BNamericas recently that energy storage systems could be installed quicker. Cammesa has an associated expressions of interest call in progress.