Petrobras evaluates routes to import gas from Argentina

A Petrobras delegation traveled to Argentina to monitor natural gas production in Vaca Muerta amid negotiations to facilitate routes to import gas from the region, Valor learned.

Vaca Muerta is a mega deposit with shale gas and oil in the province of Neuquén, in the Argentinian Patagonia, with producing fields and contracts from different operators. Petrobras is one of the companies operating in the region, with a 30% stake in one field.

With Bolivian gas production in decline, sources point to a possible interest by the Brazilian oil company in accessing more competitive gas supply sources to manage the company’s portfolio.

The alternatives for sending gas to Brazil are part of a memorandum of understanding involving Petrobras and the Argentine company Enarsa, the terms of which are confidential, Petrobras’s chief exploration and production officer, Joelson Mendes, stated in a press conference in Houston, Texas, where he is participating in the Offshore Technology Conference (OTC). He stressed that the delegation’s trip is a routine task to monitor production.

At the same time, according to Petrobras CEO Jean Paul Prates, Bolivia needs new reserves to stabilize production, which would require investment and time.

One solution is to use the idle capacity of the Brazil-Bolivia gas pipeline (Gasbol) to reverse the current flow of the North gas pipeline, in Argentina.

Another option is to tap the Néstor Kirchner gas pipeline, which connects the Vaca Muerta region from Buenos Aires to Uruguaiana (Rio Grande do Sul), but the infrastructure is incomplete. President Lula advocated for providing credit for the project during Alberto Fernández’s presidency in Argentina through the Brazilian Development Bank (BNDES). However, this project alone does not guarantee integration. Brazil must invest in pipelines to make the gas reach its consumer market.

Another alternative is to send liquefied natural gas (LNG) by ship to terminals on the Brazilian coast. Experts believe that this should happen whether Brazil is a client or not, as the players will certainly want to access the international market.

Rivaldo Moreira Neto, president of the consultancy Gas Energy, said that Argentina is already investing in the reversal of pipelines on its side of the border with Bolivia. “Argentina has what we need, which is new gas inputs and new sources of competition, and Brazil emerged as an interesting market.”

In his view, in this environment, any agreement should not be restricted to typical talks between the state-owned companies Petrobras and YPF because Argentina’s new president, Javier Milei, is not politically aligned with Brazil, and the neighboring country has a greater plurality of companies in production, which favors market competition.

As the gas is associated with oil reserves, reinjection is not an option, and Argentina has been looking for a market for the energy source. On the other hand, the Brazilian industry believes Brazil can create a firm demand for supply contracts, which would be a new market for occasional exchanges. But for that to happen, there would need to be more competition in the market.

Petrobras once held a monopoly on the gas market in Brazil. The state-owned company still holds 75% of the market after a market deconcentration process in recent years. The movement was similar in Bolivia, when Brazil started to import the input and the relationship was virtually maintained by state-owned companies, with some small contracts for private-sector companies.

Brazil’s Vice President Geraldo Alckmin and Mines and Energy Minister Alexandre Silveira publicly defend the import of Argentine gas to supply the national industry. According to Adriano Lorenzon, natural gas director at ABRACE, an association that represents large energy consumers, in a possible deal between countries, the government should discourage Petrobras in order to promote market deconcentration and encourage private-sector companies.

“Petrobras positioning itself as an intermediary, following the same historical logic it did in Bolivia, is bad for the incipient opening of the Brazilian market. Brazil should continue on the path of contributing to new entrants,” said Mr. Lorenzon.

Source: Valor International

Click here to view the original news report: https://valorinternational.globo.com/business/news/2024/05/08/petrobras-evaluates-routes-to-import-gas-from-argentina.ghtml

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