Argentina opens strategic gas pipeline tender

Argentina launched a tender to build and operate a $2bn natural gas pipeline to meet the demands of rising production from the Vaca Muerta shale formation.

The first 570km stage of the new line will transport a minimum of 15mn m3/d from Tratayen in Neuquen province to Salliquelo in Buenos Aires province and is expected to cost around $800mn. The pipeline capacity could eventually expand to as much as 40mn m3/d.

The first segment of the pipeline is expected to be completed before the onset of the southern hemisphere winter in 2021. The second leg will span 470km from Salliquelo to San Nicolas in Buenos Aires province and would be completed by late 2024.

The pipeline will allow Argentina to slash LNG imports through its Escobar terminal in Buenos Aires province, saving as much as $240mn per year, according to economy ministry estimates.

Argentina had two LNG import terminals until October, when it released a floating storage and regasification unit (FSRU) at Bahia Blanca, Buenos Aires province, which now hosts the country's first LNG export terminal.

The pipeline project is designed to overcome midstream bottlenecks that have hampered development of Vaca Muerta. Some producers, including state-controlled YPF, have been forced shut in some production because of the logistical constraints.

"The pipeline will allow us to improve the country's trade balance and increase production in Vaca Muerta," energy secretary Gustavo Lopetegui said.

There are currently three pipelines that transport gas from Vaca Muerta: 1,121km Centro Oeste operated by Transportadora de Gas del Norte, and Neuba 1 and 2, both running around 2,000km and operated by Transportadora de Gas del Sur. All three are saturated because of rising supply.

Argentina's gas production increased 5pc in the first six months of the year, compared to the same period of 2018, to 133.586mn m3/d.

The winner of the contract will operate the line for 35 years with the possibility of extending it for an additional 10. For the first 17 years, it will be able to operate under a special system that will allow it to freely negotiate fees with producers rather than be tied to a fixed rate.

Offers will be opened on 12 September and the final award is expected in mid-October.

The winning bidder will have 18 months to complete construction. If all goes according to schedule, the first stage of the line should be ready by April 2018, shortly before wintertime demand kicks in.