Argentina approved new uninterrupted gas export contracts to Chile

RIO DE JANEIRO, BRAZIL – Argentina announced that it approved new gas export contracts to Chile by authorizing six production companies with shipments to be made between January and April 2022. “It is essential to strengthening a reliable relationship with Chile”, said Argentina’s Secretary of Energy, Darío Martínez.

Expressly, the production companies YPF, Total, PanAmerican Energy, Vista Oil & Gas, Pampa Energía, and Tecpetrol will export up to 4.23 million cubic meters per day of gas to Chile from the Neuquén basin in the period indicated, which will be added to the 6 million cubic meters per day of firm exports already authorized previously.

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In addition, the official said he was “satisfied” with “the level of commercial agreements reached by the producers with their Chilean buyers”. Martínez explained that “increasing Argentine gas production and growing firm exports are positive signs of strengthening energy integration with Chile, which generate jobs for the producing regions and increase activity”.

Last October 1, Argentina had started firm gas shipments to Chile, and at that time, exports were authorized until next April for a volume of 6 million cubic meters per day.

These shipments are part of the Gas.Ar plan, launched last year by the trans-Andean government and includes incentives to increase gas production, a mechanism that has already succeeded in boosting investments in this segment.

The Gas.Ar Plan has already been contemplated since its launching in 2021 of gas exports through “firm” contracts that guarantee that the supply will not be interrupted.

“Increasing Argentine gas production and growing firm exports are positive signs of strengthening energy integration with Chile”, said Martínez.

This news comes amid the water shortage that Chile faces and whose critical moment in the electricity system would be experienced in the first part of next year.

INTERNATIONAL PRICE

A weekly report by Breves de Energía (BdE) warns that the international price of gas continues to rise, a situation that could compromise the local electricity supply. According to Cristián Muñoz, director of BdE, natural gas prices have once again climbed to record levels with the onset of winter in the northern hemisphere.

In Chile, gas-fired generation is relevant in the operation of the interconnected system. “In fact, in the first weeks of December, 11% of generation came from this fuel, and most likely its importance will be greater in the coming months,” he says.

However, he says that the marginal cost of energy, and the value of the water dammed in the Laja, seem disconnected from the international energy tightness and the country’s drought. This, because the spot price of electricity and the economic value of Laja water is several times below the spot price of LNG.

“The practical consequence is that, instead of prioritizing the dispatch of gas or oil plants and thus taking advantage of adding the largest amount of reserves in the reservoirs to face the supply of the coming months, it is cheaper to use part of these reserves today,” he explains.

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