Argentina to resume gas exports to Chile

Argentina will resume pipeline natural gas exports to neighboring Chile on 1 September for the first time in more than a decade, reflecting increased production from the Vaca Muerta shale formation.

Argentina's government published a resolution today outlining the process for companies to receive approval to carry out the sales to Chile.

The agreement will open the door to sales of as much as 22mn m3/d (777mn cf/d) of gas to Chile, according to the government of Neuquen province, which hosts Vaca Muerta.

All gas produced under a subsidy program that pays producers of approved tight and shale gas projects in the Neuquen basin as much as $7.50/mn Btu cannot be exported, according to the resolution. The subsidy, which was designed to boost production, is no longer needed because of rising production, energy minister Javier Iguacel said late last month.

The resolution published today emphasizes that exports will only be allowed to take place if they do not hurt domestic supply.

Argentina's gas output increased 4.5pc to 127.2mn m3/d in the first six months of 2018, compared to the same period last year.

Once a reliable gas exporter for the region, Argentina started to restrict exports in 2004 amid soaring demand and dwindling supply, and in 2008 began importing LNG to supplement pipeline gas from neighboring Bolivia. The cutoff of gas exports mainly impacted Chile, which later turned to LNG as well. Both countries now have two regasification terminals apiece.

Over the last three years, Chile has supplied LNG-derived gas to Argentina to meet peak wintertime supply, using two reversed cross-border pipelines.

In late June 2018 Chile´s state-owned Enap signed a three-year framework gas sales agreement with its Argentinian counterpart IEASA, formerly known as Enarsa, to permit up to 3mn b/d of pipeline supply during the southern hemisphere months.

The total of 93mn m3 of gas received from Chile in July allowed Argentina to save $21mn in diesel that it would have been forced to purchase to operate thermal power plants, according to IEASA.

Argentina's demand for gas peaks in the winter because it is used for heating and the government prioritizes residential supply.