In this list
Natural Gas

Argentina's dwindling gas output could expose it to a surge in imports: experts

Natural Gas | Energy | Electric Power | Renewables | Oil | Coal | Emissions | Energy Transition


Energy | Energy Transition | Natural Gas

Methane Performance Certificate Assessments

Energy | Electric Power | Natural Gas

US natural gas, power prices face bullish outlooks into winter heating season

Energy | Natural Gas

Permian Basin winter gas market faces pressure on maintenance, supply growth

Metals | Non-Ferrous | Steel

Steel, aluminum demand to see boost on passage of long-awaited US infrastructure package

Argentina's dwindling gas output could expose it to a surge in imports: experts


Output was down 13% on year in August

Incentives, stability seen as keys for investing

Vaca Muerta still seen as potential global source of gas

Buenos Aires — Argentina is facing potential natural gas shortages in the winter of 2021 if production continues to decline, which could lead to a rise in imports of not only gas but of diesel, experts said.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

"Argentina will have problems supplying domestic gas demand next winter if something is not done now," Juan Jose Aranguren, a former energy minister who now runs the Energy Consilium consultancy, said at the Oct. 6 El Cronista Energy Summit.

The country's gas output tumbled 13% to 125.6 million cu m/d in August from 144.4 million cu m/d a year earlier, according to Energy Secretariat data, fueling concerns that imports will have to be increased even after they were scaled back over the past few years.

Argentina, which consumes an average of 140 million cu m/d, ramped up gas imports from zero to a peak of 32 million cu m/d in 2017 after production began falling in 2004 to reach a 16-year low of 113.7 million cu m/d in 2014. The imports then fell to 18.8 million cu m/d in 2019 as production recovered, led by the development of Vaca Muerta, a huge play in Patagonia that holds some of the largest shale gas resources in the world.

This year, however, imports averaged 21.6 million cu m/d in the first eight months of the year. And if it hadn't been for a lockdown of the economy for the coronavirus pandemic, which has pushed the country into one of its deepest recessions on record, then imports would likely have been even greater this year, Aranguren said.

Call for incentives

To rebuild gas production, Aranguren said the government should implement incentives to encourage fresh drilling in Vaca Muerta as well as conventional and tight plays.

In August, the government said it was preparing a 2020-24 program for rebuilding gas production, including by creating a system of auctions for long-term supply contracts. Producers will be able to sell gas for delivery over four years — eight years from offshore gas projects — at market prices to be determined at the auctions, helping them to plan investments to increase output.

On Oct. 1, Economy Minister Martin Guzman, who oversees energy affairs, said the launch of the program was forthcoming with the goal of reducing gas and diesel imports. But every day of delay appears to be heightening concerns that the opposite could happen as the supply deficit widens.

"At this moment we are once again facing the imminence of having to start importing natural gas or, as an alternative, diesel," Jose Luis Sureda, an oil industry veteran and former national secretary of hydrocarbon resources, said at the summit.

This is a sharp turnaround from the expectations that Vaca Muerta would make the country a global gas exporter. Indeed, the play allowed gas exports to rise to 5.5 million cu m/d in 2018 from 1 million cu m/d in 2017, Energy Secretariat data show. The exports, however, fell to 4.6 million cu m/d in 2019 and an average of 4.4 million cu m/d in the first eight months of 2020.

There is a sense of urgency to avert a rise in imports. The country is in a third year of a financial crisis, which has led to a decline in dollar reserves that could limit its capacity to pay for gas imports, said Sergio Berensztein, a political analyst in Buenos Aires.

Regulatory stability

To invest in increasing gas production and then exports from Vaca Muerta, Sean Rooney, who runs Shell's operations in Argentina, said a key factor is regulatory stability.

"If the government lets the industry develop by itself without making changes or interventions, mainly in prices, there will be significant oil exports in two years, and in the longer term this will boost exports of gas in the form of LNG," Rooney said at an Oct. 6 webinar by the American Chamber of Commerce in Argentina. "It will not be easy to make natural gas exports profitable, considering that most of the gas [in Vaca Muerta] is dry and is in locations far from the coast. But it is not too late to start. The projects last decades and the local potential makes it worth it. This is a prospect that the country has to pursue."