Argentina: Infrastructure Transportation Development

Last Updated: 26 September 2018
Article by Alfaro -Abogados

Infrastructure transportation development:

The Government will call for bids for the construction of a Vaca Muerta train in November

The Norpatagónico Train, better known as the Vaca Muerta train, is a very much needed infrastructure for the rapid development of the Vaca Muerta shale area. It is key to reduce the costs of transporting key inputs for hydrocarbon activity such as fracture sands and pipes and put the Argentine shale in direct competition with the resources of the main formations of the United States.

The Ministry of Transportation of the Nation, one of the ministries that was not affected by the recent political reforms introduced by the Argentine Government to respond to the financial crisis will tender the construction of the railroad in November through the system of private - public participation (PPP), that is to say that the private sector will finance the work.

The train will allow the present operators active in the Vaca Muerta formation to bring supplies to the oil area but transported on the road back to the port of Ingeniero White.

The project under development uses a current trace that traverse existing municipalities, which has raised the objections of some of the Rio Negro mayors. They have requested that the convoy go through a new road in the north fences.

Oil companies indicated that in order to face the additional cost of the new trace, it would be necessary to raise the value of its use, taking away the initial cost advantage. Is that even going through the current trace of the tracks, the purchase of trains, the improvement and extension to Añelo (at Vaca Muerta doorsteps) involve an investment of $1,285 million dollars. To which it would have to be added another 252 million dollars if, as stated by the mayors, the route is changed.

The debates on the project will continue in a new meeting of the Vaca Muerta Table that will be held this time at the headquarters of the Ministry of Energy of the Nation. The meeting will once again involve the national ministers of Energy, Production and Transport, the holders of the country's major oil companies, representatives of the governments of Río Negro and Neuquén and the unions.

Currently in Vaca Muerta, about 30 wells per month are completed, which involve the use of 7,000 tons of sand per each well, that is, about 210,000 tons per month. That sand, which is mostly produced in Entre Ríos and Chubut, reaches the Neuquina Basin deposits in trucks, adding a logistics cost that makes its value double. With the freight train, the national government estimates that not only will the logistics cost be reduced by 50%, making each well cost up to 10% less. But it also aims to sixfold the amount of cargo transported, from 700,000 to 4, 100,000 tons per year by 2030.

Gas production grew 7% in July

Gas production increased by 7% in July compared to the same month of 2017, and accumulated an increase of 4.9% in the first seven months of the year, attributable to the areas receiving the stimulus price subsidized by the State.

In July, the extraction of gas was 4,096.3 million cubic meters, which implies about 132 million daily. Of that total, YPF extracted 1,243.5 million with a decrease of 3.1% compared to the same month last year, and Total 1,040.8 million with a decrease of 2.1%. On the other hand, Pan American Energy (PAE) showed a rise of 1.7% to 472.9 million, while Tecpetrol showed an increase of 146.8% with an extraction of 332.1 million, and Compañía General de Combustibles (CGC) extracted 133 million, 59% more.

These last two companies are those that have areas in which the price of gas is insured at US $ 7.50 per million BTU, so that the State covers the difference between that value and the realization amount.

Thus, 92% of the increase in production in the first seven months of the year corresponds to only two areas: Fortín de Piedra de Tecpetrol in Vaca Muerta and Campo Indio Este of CGC in Santa Cruz, because the benefit also extends to the Southern Basin.

The situation raises questions about the scope of the current recovery in production, because the Government announced that it will not authorize new projects with a stimulus price, with the exception of some that were already being processed.

In petroleum, 2,382,925 cubic meters were extracted in July, of which 1,077,291 were produced by YPF with an interannual increase of 1.8%, and 496,455 cubic meters correspond to PAE that showed a recovery of 6.3% with relation to the same month of 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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