Néstor Kirchner gas pipeline construction reaches final stages

On Friday, the last welding will take place on a pipeline expected to save Argentina US$2 billion in energy imports

One of the final stages in the construction of the Néstor Kirchner gas pipeline will take place on Friday 12: the last welding of the more than 50,000 pipes used for the infrastructure work. According to official estimates, the pipeline will lead to US$2 billion of foreign currency savings in the next 6 months alone.

Government sources have confirmed that the pipe is still on course to come online on June 20, and the only remaining work over the next month is hydraulic tests. On the same day, Economy Minister Sergio Massa will kick off the tender for the second tranche of the pipeline. The project could help provide the country with its first energy trade surplus in 13 years.  

The last welding will be done at kilometer 232 of the pipeline’s route, in the province of La Pampa, where tranches 1 and 2 connect. The project was divided into three tranches to speed up construction. The gas pipeline will then become one single piece running from Tratayén, in Neuquén, to Salliqueló, in the south of Buenos Aires province.  

The government will celebrate the event with a streaming broadcast this Friday at 2 p.m. The president of Energía Argentina (former Enarsa), Agustín Gerez, will be on site, while Massa and Energy Secretary Flavia Royón may join from Buenos Aires.

The last welding will enable the carrying out of hydraulic tests to check for leaks. The work is being done by the construction companies Techint, Sacde and BTU, under supervision by the former Enarsa.  

Fast construction

Official sources have confirmed that the gas pipeline will be operational on June 20. The last welding work was scheduled for May 15, but will in fact take place sooner, on this Friday 12. Although details remain unconfirmed, the pipe’s June 20 inauguration, on Argentina’s Day of the Flag, may turn into a political rally, and President Alberto Fernández is also expected to participate.  

“It’s the most important infrastructure work in the entire Frente de Todos administration,” said an official source. Government sources also highlight the “speed” with which the pipe was built. The tender was postponed several times between 2019 and its completion, and the country spent record amounts on energy imports in 2022. Then, the government stepped on the gas. Sources say by way of example that the contract was signed in August 2022 and ground work started in September.

A project that construction sources say could have taken two years will in fact be finished in less than twelve months. The reasons for this include the “coordination” between State and private companies and the use of state-of-the-art technology to speed processes up. “We never lacked one single dollar for imports,” sources from a private company said. 

Macroeconomic impact

Behind the speed of the construction, there is also a macroeconomic impact, in a context of historic drought and extreme fragility of the foreign exchange balance. In front of more than 1000 executives at the Amcham Summit, Massa described the stage of the last welding as a “historic event” for what it will imply in terms of energy import savings, which he estimated at US$1.9 billion. Enarsa calculates that savings could exceed US$2 billion, depending on how the price of fuels fluctuates and import requirements, which vary depending on economic activity and the weather. These savings are expected to reach over US$4 billion in 2024.

Looking ahead, the gas pipeline is waiting for two compression plants to start functioning. The one in the region of Tratayén has already arrived on site, but the one that will be in Saliquelló still has to be transported, although it is already in the country. From June onwards, the gas pipe will have a daily capacity to flow 11 million cubic meters (MMm3) of gas from Vaca Muerta, but with this technology, that volume will be increased to 22 MMm3.

In the second semester, the Government will try to launch a tender and start construction on two other works. One is the second stage of the NK pipeline, which may be tendered on June 20 and will be financed differently than the first part, which was funded by the Treasury. They are exploring potential finance sources from Brazil, and the private sector will be invited to participate.  

The other project slated for 2023 is the launch of the reversal of the north gas pipeline, in order to transport Vaca Muerta shell gas to northern and central Argentina, to compensate for declining flows from the Bolivian and Northern Argentina fields. It has already secured US$540 million in finance from the Andean Development Corporation (CAF, the former Development Bank of Latin America) 

So, there are expectations about closing this year with a favorable energy trade balance, although not by a wide margin. Nonetheless, sources from the Economy ministry estimate that by 2024 it will be up to US$12 billion in the black.

Originally published in Ambito.com


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