Country wants to tender 2nd part of the Néstor Kirchner Gas Pipeline work with BNDES financing to drain gas from Vaca Muerta
Argentine President Alberto Fernandez inaugurated this Sunday (9.jul.2023), the day when the country’s independence is celebrated, the 1st stretch of the GPNK (President Néstor Kirchner Gas Pipeline). The work has been classified as the most important in recent decades in the country by the government, which is now looking at possible financing from BNDES (National Bank for Economic and Social Development) to fund the next stage of construction.
The initial stretch has 573 kilometers and will connect the oil and gas reserves of schist from Camp dead cow, in the west of the country, to the province of Buenos Aires, in the north. According to the Argentine press, US$ 2.5 billion was spent on the project, whose works began in 2022 and had an early delivery schedule due to the elections in the country, scheduled for October.
The government’s plan now is to bid soon for the 2nd stage, 467 km long, to the province of Santa Fé. In a future phase, according to Casa Rosada, the gas pipeline could be expanded to export the excess gas from Vaca Muerta, considered the 2nd largest unconventional reserve in the world, to southern Brazil and northern Chile.
While the 1st stage was built with the Argentine government’s own resources, the next stage will require external financing. The main ongoing negotiations are with Brazil, so that the companies that will build the section access BNDES credit (understand more below). China, however, is also interested in financing the venture, according to information on the website. RT in Spanish.
The Minister of Economy of Argentina, Sergio Massa, said at the inauguration ceremony that in September it will be called “the tender for the 2nd section of the Néstor Kirchner gas pipeline, which runs from Salliqueló to San Jerónimo, to finish supplying the Argentine coast” and thus allow the “export via southern Brazil“.
In May of this year, the Power360 reported that TBG (Transportadora Brasileira Gasoduto Brasil-Bolivia), responsible for importing Bolivian gas to Brazil, said it would go to Argentina in August to study the economic feasibility of bringing gas from Vaca Muerta to the country.
The gas pipeline is one of the most important infrastructure projects in Argentina. With that, the country intends to stop importing gas from Bolivia, as Brazil does, and start exporting the input to neighboring countries, increasing the inflow of hard currency into the country. With the pipeline in operation, Argentina will save US$ 2.2 billion a year in imports, according to the local government.
BRAZILIAN FINANCING
In January, the Brazilian president Luiz Inacio Lula da Silva (PT) even confirmed that the BNDES will finance part of the state work on the Argentine gas pipeline. Even before the PT confirmed Brazil’s decision, however, the Argentine government had already anticipated it in 2022, after the election, saying that it would receive Brazilian money for the gas pipeline.
Argentina’s Secretary of Energy, Flavia Royón, announced on December 12, 2022 that her country already had US$ 689 million in financing from the BNDES to complete the construction of the 2nd section of the work.
On June 26 of this year, Lula spoke again about the project, saying that it is “very satisfied“with perspective”positive” of the BNDES financing the work.
“We are working on creating a comprehensive financing line for Brazilian exports to Argentina”, declared Lula at the time.
Already on the 3rd (4.jul), the Minister of Economy of Argentina, Sergio Massa, published that he met with Lula to talk about the “BNDES financing agreement [Banco Nacional de Desenvolvimento Econômico e Social] for companies participating in the construction of the 2nd stage of the Néstor Kirchner Gas Pipeline”.
The measure indicates contradictions in President Lula’s government, according to specialists consulted by the Power360 in January. For the director for Latin America of the NGO 350.org, Ilan Zugman, the Brazilian government should not finance the works. This is because the gas pipeline will carry the production of shale gas, which requires the use of hydraulic fracturing, which is more polluting, to be extracted.
Financing a pipeline to transport shale gas is still in line with the BNDES’ green agenda, which has been one of the priorities of the Brazilian development bank in recent years.
The director and founder of CBIE (Brazilian Infrastructure Center), Adriano Pires, cites another contradiction in the decision to finance the gas pipeline in Argentina. The neighboring country has 16,000 km of pipelines built, and Brazil, only 9,400 (read the infographic below).
Brazil has large pre-salt natural gas reserves, but the input is not exploited here precisely because of the lack of pipelines to transport the gas. Meanwhile, almost half of the pre-salt gas production is reinjected into the wells due to lack of outflow infrastructure.
SHALE GAS
The Vaca Muerta reserve, in western Argentina, is a geological formation rich in shale gas and oil, a type of metamorphic rock with a leafy appearance and can harbor gas and oil in crevices. To extract gas from this type of place there is a process considered very harmful to the environment, because it is necessary to break the ground, in a system known in English as “fracking“, derived from “hydraulic fracturing”.
In this type of process, it is necessary to drill a vertical hole in the soil to a certain depth. Afterwards, the drill changes to the horizontal direction to fracture the soil, inserting water and chemicals and thus releasing gas and oil that may be “trapped” between the rocks.
Shale gas is heavily exploited in the United States and has been a source of cheap energy in recent decades to boost US economic growth. But there are many concerns about the effect this has on the environment.
The Yale School of Public Health, a US university, published a text in March 2022 saying that the “fracking” used “extensively raised concerns about the impact on the environment and people’s health”.
“The process requires a large volume of water, emits gases that cause the greenhouse effect, such as methane, releases toxic air into the atmosphere and produces noise. Studies indicate that this type of operation to extract oil and gas can lead to loss of plant and animal habitats, species decline, migratory disruptions and land degradation. Studies have also shown an association between shale oil and gas extraction sites with failed pregnancies, cancer incidence, hospitalizations and asthma episodes.”, says the text of yale university.
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