Argentina’s Pampa Energía says production outlook hinges on Plan Gas auction, pipeline

Argentina’s Pampa Energía says gas production and investment forecasts for the next two years hinge on the results of a pending supply auction and the advancement of the Vaca Muerta pipeline project.

Chiefly focused on tight gas, Pampa Energía – Argentina’s No. 5 gas producer – extracts the bulk of gas from its El Mangrullo block in Vaca Muerta.

Upstream firms are awaiting auction bidding rules associated with an extension of production incentives program Plan Gas, which aims to consolidate baseline production of 70Mm3/d (million cubic meters a day) awarded in previous rounds and secure gas to fill the first phase of the Vaca Muerta pipeline, which is due to enter service mid-2023.

“Once that bidding process is over, we will have more clarity as to our gas production moving forward in the next two years,” CEO Gustavo Mariani told Pampa’s Q3 results call on Tuesday.

While questions remain over definitive outlay, Pampa officials have penciled in US$500mn for 2023, a large chunk corresponding to spending on projects that increase production. 

Argentina’s government is building the pipeline to ease a dispatch bottleneck at the Neuquén basin and increase supply to demand hubs in Buenos Aires province. Without compression – which may come online in 2H23 – the first phase will have capacity of around 11Mm3/d.

Engineers are racing against the clock to finish the first phase by next June, amid an expected 13Mm3/d decline in imported LNG availability. Failure to complete the work may ratchet up dependence on diesel and fuel oil for power generation.   

M&A, LNG

Pampa may consider obtaining a bigger stake in gas block Río Neuquén, jointly controlled by the company, Brazilian federal oil firm Petrobras and Argentine state oil company YPF. Petrobras has announced plans to sell its one-third interest in the license. 

“We will analyze the opportunity … we will see how it goes,” Mariani said, adding that exercising its right of first refusal hinged on the price sought.

Pampa, which in September agreed to sell its 28.5% stake in refiner Refinor for US$5.7mn, is also eyeing potential renewable energy and shale oil acquisitions but there is “nothing concrete yet,” CFO Nicolás Mindlin said.

In terms of LNG, Pampa has a 29.3% stake in midstream gas company TGS, which, with US LNG solutions firm Excelerate Energy, is considering a modular liquefaction plant at Bahía Blanca in Buenos Aires province.

Along with export pipelines, liquefaction facilities would initially help absorb excess production in the warmer months.

“We’re working as fast as we can in order to be able to take decisions and start the project,” Mariani said, adding that a goal was to reach this point before next year’s presidential elections, due to be held in October. 

“It’s not easy; it’s a very complex project and it takes time,” Mariani said.

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Earlier in the day, TGS’s CFO Alejandro Basso indicated that early-stage work was underway.

“We’re currently working on selection of the module,” said Basso, adding that the first module would have production capacity of 2Mt/y. “We have received several proposals from suppliers.”

Officials are also in the process of selecting an engineering services provider for the module installation.

PRODUCTION

Pampa’s gas production rose 20% year-on-year in Q3 to 10.7Mm3/d, corresponding to Plan Gas commitments and exports to Chile. 

Domestic prices averaged US$4.8/MMBTU, below the roughly US$8/MMBTU for dispatches to Chile.

Star asset El Mangrullo accounted for 8.1Mm3/d, up 31% year-on-year.

Pampa, which is planning to expand its shale gas footprint, is exporting 1.5Mm3/d to Chile, the call was told. 

Oil production was 5,500b/d in Q3, up 14% year-on-year. Some 80% of the volume went to the domestic market.