How Argentina can unleash its LNG, green hydrogen potential

Argentina holds abundant potential as an exporter of LNG and low-emission hydrogen – and unlocking this will require more than legislation, a local energy lawyer told BNamericas.

Argentina, where energy sector development tends to enjoy bipartisan support because of its economic importance, sits over vast amounts of natural gas and boasts a wealth of renewables resources, a key requisite in the manufacture of green hydrogen and its derivatives.

Bespoke regulations that help ease access to financing and establish ironclad investor guarantee mechanisms, along with a federal development roadmap particularly in the case of hydrogen, as well as long-term contracts are among pieces of the jigsaw that will need slotting into place.

Areas such as transport and storage and – in the case of hydrogen – certification, would also need addressing.

“Argentina has a wealth of resources to become, quite quickly, an exporting force, starting with LNG and then, later, blue and green hydrogen,” said Francisco J. Romano, a partner at Pérez Alati, Grondona, Benites & Arntsen law firm and co-director of the Universidad Austral Energy Institute.

“But for this to happen, it’s not just laws that are necessary; we need a roadmap to determine where we’re heading, tailor-made benefits that permit firms to address the high cost of financing these projects, and long-term contracts, because without offtakers there are no projects. Demand is king,” he told BNamericas.

Government officials have said LNG and hydrogen bills are being drafted to spur sector development. Texts could be presented this half but would unlikely be approved before October’s presidential elections.  

Romano is also a director-at-large of the Houston-headquartered Association of International Energy Negotiators (AIEN) – formerly known as AIPN – and is participating on the AIEN committee working on model offtake contracts for hydrogen, having already drawn up drafts for LNG purchases. Long-term contracts based on international models without government interference are key to develop these markets, Romano said.

Meanwhile in Argentina, in terms of an overall energy sector roadmap, attempts have been made but no definitive document has yet been published.

“There’ve been some bills, drafts, but the strategy is not very clear, and if the strategy is not clear, an eventual law would be missing something, so to speak – these two things should go hand in hand,” Romano said.

Romano, a panelist alongside energy experts Roberto Carnicer and Gonzalo Cabrera at an energy seminar hosted by the institute last week, also underscored the importance of incentives such as US-style tax breaks for hydrogen produced using carbon-capture technology.

Several LNG and green hydrogen projects have been announced publicly, targeting Buenos Aires, Río Negro and Tierra del Fuego provinces. Projects are at the early stages, with one developer – gas transporter TGS, which is planning a modular LNG plant – saying engineers were conducting economic feasibility studies.  

A steadying of the macroeconomic ship, freedom to repatriate profits, and rebuilding trust after the country halted contracted gas exports to Chile amid domestic woes in 2007, are also seen as vital to get investment flowing into the country.

Argentina is working to restore confidence among gas offtakers. Companies were recently given the green light by Buenos Aires to commit to export gas to Chile on a firm basis during months when only interruptible supply contracts have typically been authorized.  

Romano said: “You need, for confidence, not just forex freedom but also assurances over supply over the long term without curtailment.” 

Chilean generators Enel Generación, GM Holdings and Colbún are among those that typically buy Argentine gas. 

Argentina is working partly to secure offtakers for surplus production during warmer months when domestic demand drops. Producer appetites are also being whetted by the prices fetched for their exported gas – typically higher than that obtained under local gas production incentive program Plan Gas.

Drillers in the Vaca Muerta unconventionals formation are driving growth. Nationally, gas production was 130Mm3/d (million cubic meters per day) in February, up 2.0% year-on-year, according to data from the General Mosconi energy institute think tank. Shale and tight accounted for 71.7Mm3/d, a production rate 8.8% higher than a year earlier.

WORKING WITH NEIGHBORS

Because Latin America has a wealth of energy resources, low domestic energy demand compared with US and Europe and abundant land for building projects, the region is seen as well placed to ride the energy transition wave as a supplier to Europe and Asia of LNG and low-emission hydrogen and its derivatives.    

Romano underscored the importance of collaboration between Argentina and its neighbors. 

“You don’t see this in bills that have been circulating, but it must be remembered that Argentina is part of a region, with Brazil, Chile, Uruguay, Paraguay,” Romano said during Friday’s conference.

“What role do we want to play? Do we want to compete – I’d say no. What we want to do is position the Southern Cone as a relevant global provider and find a joint regional agenda where there is complementarity.”