Argentina bets on natural gas in hydrocarbon bill as Vaca Muerta comes to life

The Argentine government has sent a bill to its congress to support the exploration and production of hydrocarbons in Argentina over the next 20 years.

One of the key elements of the bill is that the “energy transition process mainly involves the widespread adoption of natural gas in the energy matrix”.

The bill includes price stabilization mechanisms and ensures that volumes produced for export will benefit from preferential tax rates and access to capital markets. This would be in addition to the current incentive programs in the sector.

“The mandate of the president and the vice-president is very clear and consists in generating a legislative tool which first allows us to ensure self-sufficiency in hydrocarbons and then to move towards an increase in production which allows us to generate exportable volumes, ”Energy said. secretary Darío Martínez. “Achieving these goals will allow a sustained inflow of foreign currency, strengthening the position of the Central Bank of Argentina.”

Natural gas already accounts for 58% of total energy consumption in the country, according to the Argentine Institute of Energy IAE based in Buenos Aires. Analysts pointed out that Argentina’s shift to a gas-centric energy mix occurred in the 1980s and 1990s with the construction of large pipelines and power plants.

What has changed since that time is the discovery and further development of the Vaca Muerta shale formation in the province of Neuquén. Activity at Vaca Muerta has recently started to explode.

Natural gas production at Vaca Muerta increased sequentially each month from May to August and reached a record high of nearly 1.6 Bcf / d in August, compared to 890-920 MMcf / d during the period. six months from November 2020 to April 2021, according to analysts at Rystad Energy.

“There is no doubt that an average development in the Vaca Muerta oil zone offers significantly higher production rates on an oil-equivalent basis than an average onshore tight oil well in the United States – the Permian Basin. of Delaware being the only one to come close to Vaca. Muerta in this aspect, ”said Artem Abramov, head of shale research at Rystad.

Significant progress has also been made in terms of efficiency in recent years, and Vaca Muerta “has moved rapidly up the global unconventional cost curve,” Rystad analysts said. They added that “a standard well in 2021 is already approaching the top quartile seen in the Permian.”

IAE analysts, however, issued a statement criticizing the hydrocarbons bill. They argued that it relies too heavily on unsustainable government subsidies and does not do enough to prepare for the energy transition.

Introducing the bill to Congress, Argentine President Alberto Fernández said the bill aims to “bring certainty” so that “the rules over the past 20 years do not change”. He added that this is an initiative “where everyone’s opinion has been heard”.

The push for certainty in natural gas development comes amid a global supply shortage that has seen record levels of liquefied natural gas (LNG) spilling into the region. Neighboring Brazil is suffering from a historic drought and imports LNG to keep the lights on.

In an unprecedented move, Argentina agreed at the end of September to re-export the LNG it imports and to ship additional gas to Brazil. The construction of a gas pipeline from Vaca Muerta in southern Brazil was also discussed again.

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