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Argentina's PAE mulls pipeline project to move natural gas to Brazil via Uruguay

Highlights

Plan is to extend existing pipeline to Brazil

BP-backed PAE in talks with Shell, Wintershall on project

Brazil is looking to replace dwindling supplies from Bolivia

  • Author
  • Charles Newbery
  • Editor
  • Richard Rubin
  • Commodity
  • LNG Natural Gas

Pan American Energy (PAE), the second-biggest oil producer and fourth for natural gas in Argentina, is in talks with its partners in a cross-border pipeline to Uruguay to extend the system to supply gas to Brazil, taking advantage of rising production in the Vaca Muerta shale play, CEO Marcos Bulgheroni said Sept. 1.

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"We have a big opportunity to export gas to Brazil," he said at a seminar organized by Clarín newspaper in Buenos Aires.

PAE, a 50/50 venture between BP and Argentina's Bridas, is discussing the project with Shell and Wintershall Dea, its partners in the Cruz del Sur Pipeline that runs from Buenos Aries to Montevideo under the Río de la Plata estuary, he said.

Brazil imports gas from Bolivia and off the global LNG market. But with Bolivia's once-large gas reserves maturing, this is raising expectations that a continued decline in deliveries from that country will lead Brazil to turn to Argentina for new supplies. Brazil has already been stepping up imports of LNG to meet its demand.

"We are going to pursue this project to build a pipeline to Brazil because Brazil strategically needs Argentinian gas to replace the reserves in Bolivia, which are falling," Bulgheroni said.

The Uruguay pipeline project "will provide an option to solve the problem of exporting gas to Brazil," he added.

The Cruz del Sur Pipeline has about 6 million cu m/d of installed capacity, according to data from the operator.

Gas producers in Argentina are looking for new sales opportunities as production rises beyond domestic demand, led by Vaca Muerta, one of the world's biggest shale plays. The country's production surged to 140 million cu m/d in July from a most recent low of 114 million in mid-2021, taking it in line with average annual demand. With so much potential for increasing production by even more — Vaca Muerta is expected to be producing 140 million cu m/d by 2030 — producers are considering installing liquefaction capacity and new pipelines to increase exports.

Argentina has pipelines in place with about 20 million cu m/d of capacity for exporting to Brazil, Chile and Uruguay. These countries imported a total of 5.4 million cu m/d from Argentina in the first seven months of this year, up from 973,000 cu m/d in the year-earlier period, according to Energy Secretariat data.

Bulgheroni said another option to deliver gas to Brazil is via Bolivia, an alternative that will become possible once Argentina completes a $3.4 billion, three-year project to build a new backbone pipeline from Vaca Muerta in northern Patagonia to central Argentina. The project is expected to start this year. With that new pipeline, which will have 44 million cu m/d of takeaway capacity from Vaca Muerta, and changes in an existing pipeline in northern Argentina so that gas can flow both ways, producers in the shale play will be able to move gas to Bolivia's system and then on to Brazil, he said.

The plans to supply more gas to Brazil come as Bolivia's gas production drops. Bolivian output fell to an average of 43.1 million cu m/d in the first half of 2022 from 47.7 million cu m/d in the year-earlier period and is down 28% from a peak of 60.8 million cu m/d in 2014, according to data from the Bolivian National Institute of Statistics.