A Complicated Major Gas Pipeline System on the Drawing Boards in South America

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A Complicated Major Gas Pipeline System on the Drawing Boards in South America

Fri, 09/18/2020 - 10:32
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Brazilian and argentine flag plumes (copyright by Shutterstock/vladm)
Brazilian and argentine flag plumes (copyright by Shutterstock/vladm)

Argentina has initiated exploratory talks with Brazil concerning the construction of a billion-dollar gas pipeline from the gigantic Vaca Muerta shale gas reserves in southern Brazil  to Porto Alegre, the capital city of the southern Brazilian state of Rio Grande do Sula. The project involves expanding the 1,430-km Argentine pipeline system as well as the construction of a 600-km stretch connecting Uruguaiana and Porto Alegre.

Yet there are rumblings that the project may not see the light of day:

"The first problem with this project is that I see no chance of Petrobras participating, so from the start we have no heavyweight player interested," Marcio Balthazar da Silveira, a partner at oil and gas consultancy firm NatGas and a former manager of the Brazilian oil company’s gas area, told BNamericas.

Furthermore because of the severity of the Covid19 pandemic in Brazil and the unexpected government expenditures to mitigate its impact the country is shortening its purse strings with little desire to increase the public debt.

Of the project’s total cost, US$3.7 of the estimated $4.9 billion would come from Argentina to build the pipeline between the province of Neuquén, where most of the deposits are located. Another US$1.2billion would be assumed by Brazil to construct the 600-km stretch noted above.

Perhaps the greatest and most fundamental criticism of the project is that the demand for the gas is not anticipated:  "Brazil today has gas from Gasbol, gas from pre-salt fields and now this Vaca Muerta project, I really don't think there’s so much demand for gas in the country right now," Rodrigo Leão, technical coordinator at Brazil’s strategic petroleum studies institute (Ineep), told BNamericas. "Also, today the major consumer market in Brazil is the country’s southeast region, mainly the state of São Paulo, and to take gas from Porto Alegre to São Paulo will need even more investments from the Brazilian side, which I don’t see as viable at this point," he added.

The PTJ will be monitoring developments closely.

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