Argentina woos gas buyers amid geopolitical flux

Argentina is courting international investors and buyers for the South American country’s abundant shale gas, but its vaunted return to the gas market is clouded by uncertainty over project financing and future demand and trade patterns at a time of geopolitical flux.

The crosscurrents are accentuated by the return of Donald Trump, an ally of Argentina’s libertarian president Javier Milei, to the White House in January.

“The Argentinian government is celebrating the arrival of Trump,” said Juan José Carbajales of Buenos Aires-based consultancy Paspartú. “But on energy, rather than complementing each other, we are more like competitors.”

Argentina aspires to become the world’s fifth largest LNG exporter, a goal anchored on its prolific Vaca Muerta formation, the largest shale operation outside the United States.

Shale gas production is forecast to jump from around 80 million cubic meters per day currently to 200 million m3/d by the end of the decade. Shale oil output is seen skyrocketing from 400,000 barrels a day to one million b/d in the same period.

Fulfilling these projections hinges on future investments estimated at $120 billion, consulting firm PwC said in a recent report.

The leading producer in Vaca Muerta is Argentina’s state-controlled YPF. Others include European producers Shell, TotalEnergies, and Argentina’s Pan American Energy (PAE) and Tecpetrol.

In a reprise of its past role as a regional gas supplier before its conventional production fell short of its domestic needs in the mid-2000s, Argentina is targeting neighbouring markets, led by Brazil.

On the sidelines of the G20 summit in Rio de Janeiro in mid-November, Argentina and Brazil signed a memorandum of understanding to facilitate Argentina’s export of 30 million m3/d of gas to southern Brazil by 2030, starting with 2 million m3/d next year.

To supply Brazil, Argentina needs to build out its midstream infrastructure. Among the pending projects is a north-south interconnection and the reversal of a northern line to reach southern Brazil via Bolivia.

Financial uncertainty

Raising capital for these projects is a steep challenge for a country still dogged by decades of financial volatility. The Milei government has terminated new public sector financing for infrastructure, offering tax and other incentives instead.

Although such belt-tightening has begun to steady Argentina’s finances, investors remain sceptical. Capital-intensive LNG projects require decades to recover investment, which implies a need for stable conditions that Argentina has yet to prove up, according to Diego Rivera of the Center for Global Energy Policy at Columbia University. The country owes more than $40 billion to the International Monetary Fund.

The economics of Argentina’s export plans are further complicated by questions over how much Bolivia will charge Argentina to transit gas through its territory. The landlocked country was once a steady pipeline gas supplier to Argentina and Brazil, but its gas production is now dwindling and it barely has enough gas to meet its own domestic needs.

In a sign of concrete progress, Brazilian marketer Grupo Matrix Energia and TotalEnergies in late November signed a ground-breaking agreement with Bolivia’s state-owned gas and oil company YPFB to transport the Argentinian gas through the Bolivian company’s under-utilised 1,000 km pipeline network.

Argentina boasts that Vaca Muerta has enough gas not only for its energy-hungry neighbours but also for buyers in Asia and Europe. Two export terminals in Rio Negro province are on the drawing board. The most ambitious is the $55 billion Argentina LNG project led by YPF, which says it has signed 19 confidentiality agreements with countries and companies so far.

Earlier this year, YPF CEO Horacio Marín led an international roadshow to European capitals and India seeking equity partners and off-take deals.

Behind the scenes, Malaysian state-controlled Petronas, YPF’s original partner with a 49% stake, may decide to pull out by a deadline at the end of December. YPF is hoping to bring on a European major such as Shell or TotalEnergies.

“We are always exploring opportunities to improve our portfolio,” Shell said in response to a query from Gas Outlook. TotalEnergies did not respond to a request for comment.

YPF plans to take a final investment decision by August 2025. The project would be rolled out in stages, starting around 2030 with two floating liquefaction units of 5 million tonnes per annum each. This would be followed by construction of a 10 mpta onshore plant. In a third stage, that capacity would be doubled.

LNG exports

As YPF lines up potential investors and buyers, PAE is spearheading a separate LNG terminal in conjunction with Norwegian firm Golar that will provide a floating liquefaction unit, the FLNG Hilli, with a nameplate capacity of 2.45 mtpa. Their 20-year Southern Energy project is scheduled to kick off in 2027.

Other companies eyeing LNG exports from Argentina are U.S. firm Excelerate Energy, Argentina’s southern pipeline operator TGS, and UK-listed Harbour Energy, which recently acquired European firm Wintershall Dea, a longtime local producer.

The LNG projects are designed to debut at a time when buyers will have ample supply options, from the U.S. to Canada to Qatar. And it’s unclear how much appetite there will be to soak it up. “Globally for LNG demand, there is quite a bit of uncertainty about how large demand growth can be in the medium-term,” said Rivera.

In a recent report, International Energy Agency Director of Energy Markets and Security Keisuke Sadamor described gas market trends as “fragile, with clear risks of future volatility”, including potential transit chokepoints in the Panama Canal and Red Sea.

Trump’s comeback ushers in more questions about future LNG market conditions, including the potential for a supply glut. Among Trump’s campaign promises, for example, is ending Russia’s war with Ukraine, a move that could unleash more Russian gas supply into Europe. Existing contracts for the transit of Russian gas through Ukraine expire at the end of 2024.

In the U.S., the world’s largest LNG exporter, Trump is expected to lift a pause on new LNG export projects that was imposed by the outgoing Biden administration in January. Even without the pause, U.S. export capacity is on track to double by 2030, said Rivera. “There will be a massive increase on the supply side in the next few years.”

On the demand side, Trump’s planned tariffs could spark another trade war with China. Then there are questions over the pace of energy transition plans, especially in Europe and the U.S.

Marín seems undaunted. “The window is now,” he said. “If you delay, the U.S. will win on supply and you’re left out. So then we’ll say Vaca Muerta is beautiful, but it stays in the ground.”