(Picture: Golar LGN)
Countries like Brazil and China Appear as Destinations for the Nation’s Main Export Project
Argentina’s major project to become a relevant player in energy exports is Liquefied Natural Gas (LNG), originating from the Vaca Muerta shale gas reserves. Key decisions are expected in the coming weeks to advance this initiative.
The Southern Energy consortium, comprising Pan American Energy (PAE), YPF, Pampa Energía, and the British Harbour Energy, is finalizing negotiations with Norway’s Golar LNG – the other partner in the venture – to bring in a second natural gas liquefaction vessel, the MK II, by 2028.
Final Investment Decision for “Argentina LNG 1” Approaching
Before the end of the first half of the year, between April and June, the country’s main gas producers – except for France’s TotalEnergies, Tecpetrol, and CGC, which have not yet joined the LNG project – are expected to reach the final investment decision for the “Argentina LNG 1” stage. This is the crucial point that will determine whether the project moves forward or is discarded.
Details of the First Phase: Argentina LNG 1
The plan is for the first liquefaction vessel to be the Hilli Episeyo, with installation scheduled for 2027 in the San Matías Gulf, in Río Negro. The initial export capacity would be equivalent to 2.45 million metric tons per year (MTPA), or about 11 million cubic meters per day, during the summer season – which in the gas market lasts seven months, from October 1st to April 30th, a period of low residential demand.
This first phase would utilize the idle installed capacity of the San Martín Gas Pipeline and gas production from the Austral Basin, including offshore fields like Fénix, in Tierra del Fuego.
The second vessel, MK II, would arrive in Argentina in 2028 with a liquefaction capacity of 3.5 MTPA, bringing the total capacity of the first stage of the export project to nearly 6 MTPA, or about 25 million cubic meters per day – equivalent to between 15% and 20% of Argentina’s total gas production currently.
To support this capacity, the construction of a gas pipeline “dedicated” exclusively to exports would be necessary. The project, which would connect the gas-producing areas of Vaca Muerta, in southeastern Neuquén, to the coast of Río Negro, should begin in mid-2026.
Comparison with the US and Potential Buyers
The main buyers of this gas could be companies from Germany and China. Argentina’s main global competitor in this market is the United States, whose shale gas development is much more advanced, presents fewer risks, has service costs 35% cheaper, and is again being driven by the government of Donald Trump – in contrast to Joe Biden, who had halted authorizations for liquefaction plants. Furthermore, the US is geographically closer to one of the largest sources of future demand: Europe.
YPF’s President and CEO, Horacio Marín, explained this week at the IEFA Latam Forum that “in Argentina, we have achieved very competitive gas liquefaction prices compared to the United States, around US$ 3 per million BTU. In addition, we can be competitive in terms of logistics, as we reach Japan 14 days earlier than the United States.”
The tariff that Golar LNG will charge for gas liquefaction – the process of cooling the gas from its natural state at 15 degrees Celsius to -161 degrees Celsius to transform it from gaseous to liquid, compressing its volume 600 times and enabling its transportation by ship – is US$ 2.60 fixed plus a variable component linked to the price of the commodity.
Among the competitive disadvantages, one advantage for Argentina is that LNG can go directly to Asia without passing through the Panama Canal – unlike US projects – which generates savings of about US$ 0.20 in logistics costs.
The oil companies operating in Argentina are working on the entire cost structure to become competitive in the global liquefied gas market.
At the wellhead, it is necessary to extract gas profitably at around US$ 2, which requires reducing service costs, the logistics of sand for fracking (high-pressure hydraulic fracturing to drill the rock where hydrocarbons are trapped), reducing drilling times, and optimizing well cycles, which in turn reduces immobilized working capital. This is what YPF and the rest of the industry are working on.
Other relevant costs are dedicated gas pipelines and the liquefaction tariff. Argentina needs to be competitive at less than US$ 8 per million BTU at the exit of Río Negro (FOB price, at the port).
Agreement with Shell for the Second Phase
On the other hand, following the signing of an agreement between YPF and Shell in December last year, the companies will retain a 60% stake in “Argentina LNG 2,” which will have a capacity of 10 MTPA or more than 40 million cubic meters per day.
The buyers (offtakers) will be Shell itself and another “supermajor,” which could be the American Chevron or ExxonMobil or the French TotalEnergies.
The final investment decision – the point of no return – must be made in 2026, so that the two liquefaction vessels can become operational in 2029.
Finally, starting in 2030, “Argentina LNG 3” would come into operation, with potential demand from Asian countries, which Marín went to court in January: Japan, China, South Korea, and India.
Brazil’s Interest in Vaca Muerta Gas
Meanwhile, something more within reach but less significant in terms of volume is Brazil’s interest in buying gas from Vaca Muerta.
Last week, at CERAWeek 2025 – the world’s largest energy conference, held in Houston, Texas, USA – the president of Petrobras, Magda Chambriard, stated that her company wants gas from Argentina but that the price needs to be even lower than the US$ 6 to US$ 6.50 it reaches at the border with Bolivia, which in turn charges about US$ 2 per million BTU as a toll for using its gas pipelines.
Petrobras would be looking to secure gas supply for a urea plant in Rio de Janeiro, where it would compete regionally with Profertil and a Pampa Energía project.
Resumo em Português:
A Argentina planeja exportar GNL de Vaca Muerta, com decisões importantes esperadas em breve. O consórcio Southern Energy negocia um segundo navio de liquefação para 2028. A decisão final de investimento para a primeira fase (“Argentina LNG 1”) é esperada para o primeiro semestre de 2025, com dois navios e capacidade de quase 6 MTPA. Um gasoduto dedicado será construído. Alemanha e China são potenciais compradores, com os EUA como principal concorrente. A YPF destaca custos competitivos e vantagens logísticas para a Ásia. A segunda fase (“Argentina LNG 2”) será com a Shell, com previsão de operação em 2029. O Brasil, através da Petrobras, demonstra interesse em comprar gás de Vaca Muerta, mas busca preços mais competitivos.
Resumen en Español:
Argentina planea exportar GNL de Vaca Muerta, con decisiones importantes esperadas pronto. El consorcio Southern Energy negocia un segundo barco de licuefacción para 2028. La decisión final de inversión para la primera fase (“Argentina LNG 1”) se espera para el primer semestre de 2025, con dos barcos y capacidad de casi 6 MTPA. Se construirá un gasoducto dedicado. Alemania y China son potenciales compradores, con EE.UU. como principal competidor. YPF destaca costos competitivos y ventajas logísticas para Asia. La segunda fase (“Argentina LNG 2”) será con Shell, con previsión de operación en 2029. Brasil, a través de Petrobras, demuestra interés en comprar gas de Vaca Muerta, pero busca precios más competitivos.
