Economy Ministry secures financing for the North Gas Pipeline

The project will provide natural gas to the northern provinces, replacing Bolivian imports and allowing exports

The inauguration of the Néstor Kirchner Gas Pipeline was only the first of a series of works the State has planned to achieve energy self-sufficiency and export to the region, since Vaca Muerta’s resources could last for 150 years. The Reversal of the North Gas Pipeline is the next step, as it will allow natural gas to be distributed to the center and northern provinces, saving US$3.5 billion by not importing energy from Bolivia, which costs four times as much. 

The government has just finished defining the structure of the financing and the call for tender will take place in the coming days. The expectation is that it will be ready for the winter of 2024.   

Energy self-sufficiency and dollar savings  

Government sources explain energy self-sufficiency is the key of the first stage of the work. The reason is that the Bolivia import contract, which should have ended in 2026 since it was originally signed for 20 years, will actually end on December 31 this year because the neighboring country’s gas basins are in decline. 

Having gas in northern Argentina is also essential for electricity, since power generation is done through thermal power plants that need natural gas because they are not dual (in which case they could be provisioned with liquid fuels.)      

The other element apart from self-sufficiency is saving foreign currency by lowering import costs. Official sources said the pipeline will result in US$3.5 billion savings over the next three years, from what they will no longer have to pay Bolivia every year. Starting in 2025, these savings will add to US$2.2 billion every year. A

Sources from the Economy Ministry led by Sergio Massa also added that this energy will cost 70% less than Bolivia’s. The price for locally-injected gas is US$ 3.79 MM/Btu against the US$11.32 of imported natural gas, and much cheaper than the US$18.24 of liquified natural gas (GNL), according to the latest May data from the energy subsidies monitoring agency of the Congressional Budget Office (OPC).   

How the financing will work

The Energy Secretariat has now defined the financing structure. Massa had already agreed to a US$540 million credit from the Development Bank of Latin America and the Caribbean (CAF), which was approved in April. However, the total cost is estimated to be US$750 million. 

While at first there were talks about potential financing coming from private sector companies that would complement those remaining US$210 million, the Secretariat decided that the financier will be Cammesa, the private-public company that manages the wholesale electricity market.

The decision — to be published in the Official Gazette soon — establishes that the financing will go through a “reimbursable credit” operation with the money Cammesa obtained from exporting electric power, which they placed in a stabilization fund created in 2021.  

The next step would be the call for a tender — first for the pipes and then for the construction companies — that will take place in the next two weeks, Massa announced. The works consist in: an interconnection gas pipeline of 36″ nominal diameter and 123 km long, from the “La Carlota” compression plant of the Center West gas pipeline, to the “Tío Pujio” compression plant on the North Gas Pipeline, 62 kilometers of 30″ loops on the North Gas Pipeline, between the towns of Tío Pujio and Ferreyra, and injection reversal works at the plants.

In the mid-term, the infrastructure will enable Argentina to export gas to 3 countries in the region during the spring, the fall and the summer: to southern Brazil and northern Chile in a first stage, and then to Bolivia, for at least US$4 billion per year, according to estimates from consulting firm Gas Energy Latin America (Gela).

Originally published in / Translated by Agustín Mango


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