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Growth in Argentina’s Vaca Muerta shale and tight gas production leads to LNG exports ›

Argentina’s domestic natural gas production has been rising steadily in the past three years, largely because of increasing production from the Neuquén Basin’s Vaca Muerta shale and tight gas play.

Production from Vaca Muerta surpassed 1.0 billion cubic feet per day (Bcf/d) in December 2018. As production has grown, Argentina has resumed exporting natural gas by pipeline to neighboring Chile and Brazil and has started exporting liquefied natural gas (LNG). Argentina’s first LNG export cargo was shipped on June 6 from the offshore Tango floating liquefaction unit (FLNG).

The growth in Argentina’s shale and tight gas production has partially offset declines in its natural gas production from mature fields. Production from Vaca Muerta accounts for about 23% of Argentina’s total gross natural gas production. The Vaca Muerta shale formation has technically recoverable resources of 308 trillion cubic feet of natural gas and 16 billion barrels of oil and condensate within 8.6 million acres, and it is geologically comparable to the Eagle Ford shale play in southern Texas. Only 4% of Vaca Muerta’s acreage has entered the development phase so far.

Argentina’s domestic natural gas production exceeds consumption during warmer months (October through April), but production is insufficient to meet demand during colder months (May through September), which requires Argentina to import natural gas by both pipeline and as LNG. Because Argentina doesn’t have geologically suitable formations to serve as large-scale natural gas storage facilities, natural gas producers have to shut in surplus production to accommodate seasonal consumption patterns. Argentina is conducting feasibility studies to identify potential natural gas storage sites.

From 1990 through 2007, Argentina was a net exporter of natural gas. Since then, Argentina has been importing more natural gas both by pipeline (mainly from Bolivia) and as LNG. Argentina imports LNG using a floating storage and regasification vessel (FSRU) moored at the Escobar port near Buenos Aires.

Since becoming a net natural gas importer in 2008, Argentina has imported natural gas by both pipeline and as LNG throughout the year. In the last two years, with the growth in domestic production, Argentina has been importing LNG only during cooler months (March through October). Argentina will likely continue importing LNG during cooler months until additional pipeline infrastructure is built to deliver growing shale production to major demand centers.

Argentina’s seasonal demand patterns—counter to countries in the Northern Hemisphere—allow Argentina to export LNG during months when major LNG consuming countries in Asia are importing more LNG.

Natural gas from Vaca Muerta is transported by an existing pipeline network to the port of Bahía Blanca, where it is liquefied at Tango FLNG. These pipelines were previously used to transport imported LNG from an FSRU moored offshore at Bahía Blanca.

Tango FLNG has an LNG production capacity of 500,000 metric tons (0.07 Bcf/d) and is expected to produce up to eight LNG-export cargoes per year. Future growth in LNG exports will require additional investments in onshore liquefaction facilities and pipeline infrastructure or the use of additional floating LNG-production vessels.

Principal contributors: Faouzi Aloulou, Victoria Zaretskaya

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Global LNG export capacity is expected to increase by 45% between 2017 and 2022, to more than 400 metric MMtpy, with 90% of the new capacity coming from sanctioned projects in the U.S. and Australia. By 2050, this capacity is anticipated to exceed 700 MMtpy. Regasification capacity is anticipated to increase even more sharply.
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What if a cost-effective way existed to extract and distribute natural gas, regardless of proximity to pipeline, and bring those assets back to production? What if the industry went in a direction that did not need pipelines? For those looking to monetize unproductive natural gas assets or bring unproductive wells back to production, it would be revolutionary.
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