Southern Cone natgas watch: Plan Gas offers, Uruguay purchase, priority demand

Argentine hydrocarbons firms offered more than double the amount of gas sought for the first phase of the under-construction Vaca Muerta gas pipeline project.

Parties bid to inject a combined 45Mm3/d (million cubic meters per day) in a supply auction for production incentives program Plan Gas, state news agency Télam reported.

The government wants to secure gas to fill the first phase of the publicly funded gas pipeline, which will have initial capacity of around 11Mm3/d, rising to about 22Mm3/d once compression plants are installed, something that could happen by end-2023. Argentina wants to wean itself off imported gas – which strains the country’s finances – and boost exports. The new pipeline will support growth in domestic output, chiefly from shale and tight gas fields in the Neuquén basin. 

The supply auction, corresponding to Plan Gas rounds 4.0 and 5.1, was launched to not only secure gas for the new pipeline but also to extend to 2028 production commitments made under rounds 1 and 3.

The first round of Plan Gas, launched in 2020, was held to secure base volume of 70Mm3/d for 365 days a year through 2024. Subsequent rounds were held to secure additional gas, including over the colder months. 

In the latest auction, bids for the equivalent of around 98% of existing supply commitments were made and prices remained virtually unchanged at US$3.54/MMBTU, Télam said.

VOLUMES SOUGHT FOR VACA MUERTA DUCT

The federal energy department, seeking a base volume of 14Mm3/d for the first phase of the pipeline, received associated offers for almost 18Mm3/d at an average price of US$3.41/MMBTU, below the ceiling of US$4/MMBTU.

Officials are also looking to secure peak volumes during winter, when gas demand from generators spikes. Producers offered almost 28Mm3/d, roughly double the 14Mm3/d sought, at an average price of US$4.7/MMBTU, 32% less than the ceiling price.

LNG prices for next winter exceed US$40/MMBTU. Argentina imports LNG to meet demand during colder months.   

SECOND PHASE

The federal government is looking to secure financing for construction of the second phase of the duct, also known as the Presidente Néstor Kirchner pipeline, recently announcing a US$689mn deal with Brazilian development bank BNDES. An associated engineering contract has been awarded.

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A gas trader won a contract to supply, on a firm basis, 350,000m3/d Argentine gas destined to neighbor Uruguay from January-April, at a price of US$4.7/MMBTU.

The gas – contracted by state energy company Energía Argentina – will be sold to Uruguayan state hydrocarbons firm Ancap, natural gas market trading platform Megsa said.

Argentina exported 240,000m3/d to Uruguay in November through the Cruz del Sur pipeline, up 7% year-on-year, according to data from gas regulator Enargas.

Among other assets, Uruguay’s state power firm UTE has two gas turbine units for combined installed capacity of 562MW and a 532MW combined-cycle plant. The plants consumed 1.91Mm3 gas in 2021, up from zero in 2020 but down from 32.1Mm3 in 2019.

Thermoelectric plants consumed 461,792m3 diesel last year, up from 167,259m3 in 2020 and 34,877m3 in 2019.

Uruguay’s 4.9GW generation park comprises hydropower plants (31% of capacity), wind farms (31%), fossil fuel (24%), biomass (9%) and solar (5%). New capacity will likely be solar. 

Water flows to Uruguay’s main generator, the Salto Grande hydroelectric power station, were down by more than half in November compared with the historical average for the month, local energy consulting firm SEG Ingeniería said, citing data from electricity market administrator Adme.   

Uruguay’s share of installed capacity at the plant is 945MW. The other half corresponds to neighbor and co-operator Argentina. 

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Argentina’s federal energy department forecast that for 2023 priority demand for natural gas will reach 15.2Bm3 distributed. 

As things stand, the state would cover 67.3%, or US$3.52/MMTBTU of the price at the point of entry into the transport system. Priority users, chiefly households, would pay the other 32.7% (US$1.71/MMBTU). 

To help improve public finances, Argentina is working to trim a hefty basic services subsidy bill.