{"id":50391030,"date":"2024-03-14T11:52:30","date_gmt":"2024-03-14T11:52:30","guid":{"rendered":"https:\/\/dialogochino.net\/?p=391030"},"modified":"2024-04-11T11:39:47","modified_gmt":"2024-04-11T11:39:47","slug":"391030-argentina-eyes-a-risky-gamble-on-gas-exports","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/energy\/391030-argentina-eyes-a-risky-gamble-on-gas-exports\/","title":{"rendered":"Argentina eyes a risky gamble on gas exports"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Under its new president Javier Milei, Argentina is hoping to move ahead with its plans to process and export liquefied natural gas (LNG), taking advantage of the potential of the vast <a href=\"https:\/\/dialogue.earth\/en\/climate-energy\/370438-vaca-muerta-gas-field-residents-lack-heat-and-power\/\">Vaca Muerta<\/a> oil and gas field in northern Patagonia.<\/p>\n\n\n\n<p>However, if the new government is to realise these ambitions, it must confront several looming questions: the economic risks of the investment needed, its ability to compete with countries with more developed industries, and the threats a scaling-up of gas infrastructure would pose to Argentina\u2019s climate commitments.<\/p>\n\n\n\n<p>Over the last five years, LNG has experienced some of the fastest growing demand amongst fuels worldwide, with a cumulative annual rate of 3.9%, according to data from the consulting firm Econom\u00eda &amp; Energ\u00eda shared with Di\u00e1logo Chino. This liquefied form of natural gas is derived through a cooling process that reduces the volume of the gas by around 600 times. In this format, it can be shipped in large quantities to markets that cannot be reached by pipeline.<\/p>\n\n\n\n<p>The liquefaction process requires the construction of plants that typically cost billions of dollars and pipelines dedicated to supplying these port terminals, on top of the investment in exploration and production facilities at gas fields. This is infrastructure that Argentina currently lacks. But despite having announced several LNG projects, the country has not yet been able to attract investors to finance their creation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-argentina-s-lng-projects\">Argentina\u2019s LNG projects<\/h2>\n\n\n\n<p>There are three different LNG projects in Argentina in the pre-feasibility study stage, the most advanced of which is the state-controlled oil company YPF and Malaysia\u2019s Petronas joint venture that has promised an <a href=\"https:\/\/www.infobae.com\/america\/agencias\/2023\/09\/13\/argentina-necesita-inversiones-por-50000-millones-de-dolares-para-exportar-gnl\/\">investment<\/a> of up to US$50 billion, should it move forward. The <a href=\"https:\/\/www.ogj.com\/pipelines-transportation\/lng\/article\/14296702\/ypf-petronas-progress-design-of-lng-export-project\">proposal<\/a> envisages the construction of three dedicated pipelines and a plant with an annual capacity of 25 million tonnes.<\/p>\n\n\n\n<div class=\"wp-block-cd-article-image aligncenter block--article-image block--article-image--article\" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><div class=\"block--article-image__column\"><div class=\"hide-expand block--article-image__image\"><img class=\"lazy\" data-src=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/LNG-production-plant-in-Argentina_Casa-Rosada_ypfpetronas.jpg\" data-srcset=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/LNG-production-plant-in-Argentina_Casa-Rosada_ypfpetronas-768x512.jpg 768w, https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/LNG-production-plant-in-Argentina_Casa-Rosada_ypfpetronas-1024x682.jpg 1024w, https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/LNG-production-plant-in-Argentina_Casa-Rosada_ypfpetronas.jpg 1940w\" data-sizes=\"(max-width: 600px) 768px, (max-width: 1024px) 1024px, 1940px\" alt=\"three standing men clapping\"\/><\/div><div class=\"block--article-image__content\"><div itemprop=\"caption\" class=\"block--article-image__caption\">Former Argentine president Alberto Fern\u00e1ndez with then head of state oil company YPF Pablo Gonz\u00e1lez (left), and Datuk Tengku Muhammad Taufik, CEO of Petronas (right) in September 2022. They announced an agreement for the construction of an LNG production plant in Argentina. (Image: <a href=\"https:\/\/www.casarosada.gob.ar\/slider-principal\/49086-el-presidente-anuncio-un-acuerdo-entre-ypf-y-petronas-para-desarrollar-una-planta-productora-de-gnl-que-cambiara-la-matriz-energetica-del-pais\">Casa Rosada<\/a>, <a href=\"https:\/\/creativecommons.org\/licenses\/by\/2.5\/ar\/\">CC BY 2.5 AR<\/a>)<\/div><\/div><\/div><meta itemprop=\"contentUrl\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/LNG-production-plant-in-Argentina_Casa-Rosada_ypfpetronas.jpg\"\/><meta itemprop=\"contentSize\" content=\"725 KB\"\/><meta itemprop=\"height\" content=\"1293\"\/><meta itemprop=\"width\" content=\"1940\"\/><meta itemprop=\"author\"\/><meta itemprop=\"representativeOfPage\" content=\"true\"\/><\/div>\n\n\n\n<p>International LNG conglomerate Excelerate Energy and Argentina\u2019s Transportadora de Gas del Sur (TGS) jointly have <a href=\"https:\/\/www.bloomberglinea.com\/2022\/09\/08\/argentina-se-entusiasma-con-exportar-gnl-cuales-son-los-tres-proyectos-en-carpeta\/\">another plan<\/a> in the pipeline in Bah\u00eda Blanca, south-west of Buenos Aires. This project is smaller in scale, with an initial module of 4 million cubic metres per day, though this could eventually increase to four modules of the same capacity.<\/p>\n\n\n\n<p>Tecpetrol, the oil company of Argentine conglomerate Techint, has similarly <a href=\"https:\/\/www.argenports.com.ar\/nota\/carreras-dijo-que-tecpetrol-piensa-en-un-gasoducto-y-una-planta-de-gnl-en-rio-negro\">expressed interest<\/a> in investing in liquefaction plants, including in the northern Patagonian province of R\u00edo Negro. It has not given further details of the project.<\/p>\n\n\n\n<p>In all three cases, the companies involved stated that the enactment of a new law to promote the gas industry is one of the necessary conditions for moving towards the development stage.<\/p>\n\n\n\n<p>After years of discussions with oil companies, Argentina\u2019s previous government, led by Alberto Fern\u00e1ndez, presented a bill granting them benefits including exemption from import tax and an assurance of \u201cfiscal stability\u201d for 30 years, which <a href=\"https:\/\/www.mejorenergia.com.ar\/noticias\/2023\/10\/11\/2031-ley-de-gnl-se-aprobo-en-diputados-y-ahora-pasa-al-senado\">passed<\/a> the lower house of congress.<\/p>\n\n\n\n<p>However, with the change of government came a slight change in preferences: shortly after taking office last December, the executive branch of Milei\u2019s administration presented a <a href=\"https:\/\/www.mejorenergia.com.ar\/noticias\/2023\/12\/28\/2334-como-la-ley-mnibus-de-milei-quiere-cambiar-las-reglas-para-vaca-muerta\">new<\/a> bill floating similar ideas, but with greater concessions to private capital, including eliminating the need for oil companies to prioritise the domestic market.<\/p>\n\n\n\n<p>\u201cArgentina is famous for its regulatory volatility due to its recurrent antagonistic cycles between open and closed economies, which have alternated for almost a century. This volatility threatens the viability of long-term investment projects,\u201d says Pablo Rueda, an Argentine lawyer specialising in oil and gas regulation.<\/p>\n\n\n\n<div class=\"wp-block-cd-article-image aligncenter block--article-image block--article-image--article\" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><div class=\"block--article-image__column\"><div class=\"hide-expand block--article-image__image\"><img class=\"lazy\" data-src=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/Gas-pipeline-construction_Alamy_2WP8C6A-scaled.jpg\" data-srcset=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/Gas-pipeline-construction_Alamy_2WP8C6A-768x512.jpg 768w, https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/Gas-pipeline-construction_Alamy_2WP8C6A-1024x683.jpg 1024w, https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/Gas-pipeline-construction_Alamy_2WP8C6A-scaled.jpg 2560w\" data-sizes=\"(max-width: 600px) 768px, (max-width: 1024px) 1024px, 2560px\" alt=\"line of large hollow tubes in field\"\/><\/div><div class=\"block--article-image__content\"><div itemprop=\"caption\" class=\"block--article-image__caption\">Construction of the President N\u00e9stor Kirchner gas pipeline in the province of La Pampa, Argentina, in January 2023 (Image: Gabriel Rojo \/ Alamy)<\/div><\/div><\/div><meta itemprop=\"contentUrl\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2024\/03\/Gas-pipeline-construction_Alamy_2WP8C6A-scaled.jpg\"\/><meta itemprop=\"contentSize\" content=\"578 KB\"\/><meta itemprop=\"height\" content=\"1708\"\/><meta itemprop=\"width\" content=\"2560\"\/><meta itemprop=\"author\"\/><meta itemprop=\"representativeOfPage\" content=\"true\"\/><\/div>\n\n\n\n<p>Beyond the pending decision over the new law, the Milei government has also called on private oil companies interested in LNG investments to coordinate their efforts. \u201cLNG is only viable if there is a single project at the national level among all the companies, led by YPF,\u201d said a company source who asked not to be identified. They said the state firm will meet with interested companies in mid-March, and that there are \u201calready four that will surely enter\u201d into LNG initiatives.<\/p>\n\n\n\n<p>Meanwhile, the government is moving ahead with the tender for another key project, this time to expand Argentina\u2019s gas pipeline network and continue <a href=\"https:\/\/en.mercopress.com\/2023\/09\/14\/argentina-planning-to-become-a-major-world-exporter-of-natural-gas\">reducing its dependence on imports<\/a>. With financing from the Development Bank of Latin America and the Caribbean (CAF), a gas pipeline is <a href=\"https:\/\/www.pagina12.com.ar\/701527-avanzan-con-la-reversion-del-gasoducto-norte\">expected<\/a> to be completed this year to transport gas from Vaca Muerta to more northerly provinces such as C\u00f3rdoba and Catamarca. This supply is set to completely replace the gas shipments the country currently receives from Bolivia.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-climate-cost-of-lng\">The climate cost of LNG<\/h2>\n\n\n\n<p>Many supporters of natural gas have sought to position it as a \u201ctransition fuel\u201d \u2013 with this wording even alluded to in the final text of the <a href=\"https:\/\/dialogue.earth\/en\/climate-energy\/386431-cop28-is-latin-america-ready-to-move-away-from-fossil-fuels\/\">COP28 climate change conference<\/a> in 2023. This framing often sees gas pitched as a potential replacement in power generation for coal \u2013 a much more polluting fossil fuel. But the greenhouse gas emissions associated with LNG remain significant.<\/p>\n\n\n\n<p>For Juan Carlos Villalonga, an energy consultant and former deputy in Argentina\u2019s congress, to call gas a transition fuel is misleading. \u201cIt is a fossil fuel that will have to be abandoned,\u201d he says. \u201cIts incorporation is beneficial as a fuel only to the extent that it serves to accelerate the closure of coal plants.\u201d<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"50050409\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>He adds that a switch from coal to gas is not always justifiable, as any new gas plant will itself require shutting down to be replaced by renewable or zero-emissions energy sources, as forecasts suggest will be necessary in the long term.<\/p>\n\n\n\n<p>In addition to the emissions inherent to natural gas extraction, another drawback to LNG is its increased energy intensity, due to the liquefaction, transport, regasification and storage involved in its production and use, which substantially increases its carbon footprint. In other words, transforming the gas into a liquid state, transporting it by ship to the destination port and converting it back to a gaseous state implies a far higher energy cost.<\/p>\n\n\n\n<p>Over the entire life cycle, LNG emissions may even exceed those of coal, according to an upcoming Cornell University <a href=\"https:\/\/www.highnorthnews.com\/en\/new-lifecycle-assessment-greenhouse-gases-lng-spells-bad-news-emissions-arctic-projects\">study<\/a>. \u201cThe methane emitted during the transport of LNG by combustion to drive the ship\u2019s propellers, in particular, contributes to the total emissions, since it is about 80 times more potent than carbon dioxide,\u201d explains \u00c1lvaro Zopatti, an Argentine climate and environmental consultant.<\/p>\n\n\n\n<p>While the study looks specifically at LNG in the United States, its conclusions may be even more pertinent to Argentina: a country that is far from potential import partners in Asia and Europe, implying a longer distance travelled, and therefore higher fuel consumption, and increased CO2 and methane emissions.<\/p>\n\n\n\n<p>Rueda acknowledges the climate challenges associated with LNG and believes that new projects could be complemented with carbon capture \u2013 a technology that seeks to store the carbon dioxide generated by burning natural gas so that it is not emitted into the atmosphere. He says such projects will allow them to be sustainable in the long term while competing with clean energy.<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"50381775\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>\u201cArgentina must put carbon capture projects on the climate change mitigation agenda and encourage the use of natural gas in global markets as a necessary step in the energy transition from coal to renewables,\u201d Rueda tells Di\u00e1logo Chino.<\/p>\n\n\n\n<p>However, carbon capture has not yet been tested on a large scale, and there are <a href=\"https:\/\/www.iisd.org\/articles\/insight\/unpacking-carbon-capture-storage-technology\">widespread doubts<\/a> about its feasibility due to the high cost associated with such projects.<\/p>\n\n\n\n<p>Worldwide, current investment in planned and under-construction natural gas pipelines reportedly stands <a href=\"https:\/\/www.reuters.com\/markets\/commodities\/world-get-more-gassy-despite-energy-transition-momentum-2024-01-11\/\">at over $720 billion<\/a>, with an additional $190 billion set to be spent on infrastructure for LNG imports, confirming and extending the use of the fuel to well beyond 2030. The Climate Action Tracker project has noted that the emissions <a href=\"https:\/\/climateactiontracker.org\/publications\/massive-gas-expansion-risks-overtaking-positive-climate-policies\/\">generated<\/a> by planned LNG expansion would put the targets of the Paris Agreement at risk.<\/p>\n\n\n\n<p>In this context, US president Joe Biden has acknowledged his country\u2019s status as the world\u2019s largest exporter of LNG, and announced on 26 January the <a href=\"https:\/\/www.whitehouse.gov\/briefing-room\/statements-releases\/2024\/01\/26\/fact-sheet-biden-harris-administration-announces-temporary-pause-on-pending-approvals-of-liquefied-natural-gas-exports\/\">suspension<\/a> of a dozen new LNG export authorisations.<\/p>\n\n\n\n<p>Like the US, Argentina also has climate goals to meet that could be jeopardised by its LNG expansion ambitions. Its 2030 energy transition plan commits to <a href=\"https:\/\/unfccc.int\/sites\/default\/files\/NDC\/2022-05\/Actualizacio%CC%81n%20meta%20de%20emisiones%202030.pdf\">limiting<\/a> net emissions to 349 million tonnes of CO2 and <a href=\"https:\/\/dialogue.earth\/en\/climate-energy\/374748-argentina-targets-huge-expansion-of-renewable-energy-by-2030\/\">achieving<\/a> 57% renewable energy use in electricity generation.<\/p>\n\n\n\n<div class=\"wp-block-cd-article-image aligncenter block--article-image block--article-image--article\" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><div class=\"block--article-image__column\"><div class=\"hide-expand block--article-image__image\"><img class=\"lazy\" data-src=\"https:\/\/dialogue.earth\/content\/uploads\/2022\/11\/Wind-farm-Argentina-carbon-market_Martin-Zabala_Xinhua_Alamy_EWYM8K-scaled.jpg\" data-srcset=\"https:\/\/dialogue.earth\/content\/uploads\/2022\/11\/Wind-farm-Argentina-carbon-market_Martin-Zabala_Xinhua_Alamy_EWYM8K-scaled.jpg 2000w\" data-sizes=\"(max-width: 600px) 768px, (max-width: 1024px) 1024px, 2000px\" alt=\"windmills at sunset\"\/><\/div><div class=\"block--article-image__content\"><div itemprop=\"caption\" class=\"block--article-image__caption\">A wind farm in La Rioja province, Argentina. Some observers fear that Argentina\u2019s ambitions to expand LNG capacity could jeopardise renewable energy projects. (Image: Martin Zabala \/ Xinhua \/ Alamy)<\/div><\/div><\/div><meta itemprop=\"contentUrl\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2022\/11\/Wind-farm-Argentina-carbon-market_Martin-Zabala_Xinhua_Alamy_EWYM8K-scaled.jpg\"\/><meta itemprop=\"contentSize\" content=\"253 KB\"\/><meta itemprop=\"height\" content=\"1299\"\/><meta itemprop=\"width\" content=\"2000\"\/><meta itemprop=\"author\"\/><meta itemprop=\"representativeOfPage\" content=\"true\"\/><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-barriers-to-lng-in-argentina\">Barriers to LNG in Argentina<\/h2>\n\n\n\n<p>Another cause for doubts over Argentina\u2019s LNG export potential is that its plans, and capacity, may be arriving too late. If work were to begin in the very short term, which does not seem feasible as projects are still under discussion, the first shiploads could only be exported in three years\u2019 time, and maximum capacity would be reached in the early 2030s, according to YPF information shared with Di\u00e1logo Chino.<\/p>\n\n\n\n<p>This creates some uncertainty and risk for the country, with several consultancies and companies foreseeing a decline in global demand from 2030. According to the climate thinktank E3G, the implementation of the European energy plan REPowerEU means the volume of gas consumed by the European Union\u2019s member states could <a href=\"https:\/\/www.e3g.org\/news\/repowereu-calls-for-stronger-eu-green-deal-implementation\/\">shrink<\/a> by 52% in 2030 from 2019 values.<\/p>\n\n\n\n<div class=\"wp-block-cd-pull-quote block--pull-quote\"><div class=\"block--pull-quote__wrapper\"><blockquote class=\"block--pull-quote__quote\">The US and Australia have won the first round of the battle to replace Russian gas. The space for Argentina as a competitive producer is quite limited<\/blockquote><cite class=\"block--pull-quote__cite\">Christian Alonso Sisini, Argentine energy consultant<\/cite><\/div><\/div>\n\n\n\n<p>Last year, former Argentine president Fern\u00e1ndez <a href=\"https:\/\/www.pagina12.com.ar\/568859-acuerdo-con-la-ue-para-dar-impulso-al-gnl\">signed<\/a> a memorandum of understanding with the president of the European Commission, Ursula von der Leyen, in which they agreed to promote the supply of LNG from Argentina to the bloc. But this is a non-binding document that does not guarantee any type of investment. A source at a European embassy in Argentina, who asked not to be identified, told Di\u00e1logo Chino that European interest is likely to be more focused on green hydrogen and not LNG, which they consider will be a more dispensable fuel from 2030 onwards.<\/p>\n\n\n\n<p>In its <a href=\"https:\/\/www.bp.com\/content\/dam\/bp\/business-sites\/en\/global\/corporate\/pdfs\/energy-economics\/energy-outlook\/bp-energy-outlook-2023.pdf\">2023 energy outlook<\/a>, the energy giant BP outlines three possible scenarios for 2050. The most optimistic for LNG is the \u201cnew momentum\u201d scenario, which takes into account the decarbonisation targets set in recent years and anticipates a 30% growth in demand for LNG between 2030 and 2050. The second case, \u201caccelerated\u201d, projects a move towards an energy sector with lower carbon emissions and, finally, there is an assessment of a \u201cnet zero\u201d scenario. In the latter two cases, LNG purchases would be reduced by 40%.<\/p>\n\n\n\n<p>In addition, in its <a href=\"https:\/\/igu.org\/resources\/lng2023-world-lng-report\/\">2023 World LNG Report<\/a>, the industry organisation International Gas Union projects a strong inflow of LNG supply in the coming years that could reduce the space for Argentina to occupy. Considering only projects already under construction, installed liquefaction capacity would grow by 32% between 2022 and 2028, according to the report. The largest increase would come from the United States, followed by Qatar, Canada, and Mozambique.&nbsp;<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"50388075\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>\u201cFor Argentina to be competitive, it has to have natural gas prices below $2 per million British thermal units, and the price of LNG should not go below $10 MMBtu,\u201d says Ra\u00fal Bertero, deputy dean of the engineering faculty at the University of Buenos Aires.<\/p>\n\n\n\n<p>Today, the Argentines state pays gas producers a price of <a href=\"https:\/\/www.spglobal.com\/commodityinsights\/en\/market-insights\/latest-news\/natural-gas\/010824-argentina-to-hike-natural-gas-rates-to-stimulate-domestic-production\">almost $4<\/a> per MMBtu on average to supply the local market \u2013 double the value Bertero states \u2013 as a ceiling to be able to join the exporters\u2019 club.<\/p>\n\n\n\n<p>\u201cIt is clear that the US and Australia have won the first round of the battle to replace Russia in the international gas market,\u201d says Argentine energy consultant Christian Alonso Sisini. \u201cThey have already beaten us and will continue to do so. The space where we can see ourselves as a competitive producer in the medium- to long-term is quite limited.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Gas is in demand, for now. But Argentina\u2019s economic woes, climate commitments and long-term outlook cast doubt on its ambitions to export LNG<\/p>\n","protected":false},"author":50000524,"featured_media":50391034,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[757],"tags":[547,556,600],"hashtags":[],"country":[50000020],"class_list":["post-50391030","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-fossil-fuels","tag-infrastructure","tag-trade","country-argentina"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Argentina eyes a risky gamble on gas exports | Dialogue Earth<\/title>\n<meta name=\"description\" content=\"Gas is in demand \u2013 for now. 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