Argentina energy producer Pampa Energía SA will decide in the next three months whether to partner on a multibillion-dollar LNG plant as President Javier Milei’s crusade to deregulate the economy accelerates development of the world’s second-biggest shale gas deposit.
Pampa has ramped up investments in the Patagonia shale patch known as Vaca Muerta — or “dead cow” in English — where it is already one of the biggest natural gas producers. Now, it is hurrying to find an outlet for all the fuel as other drillers advance plans for export terminals.
Pampa looked into building a small plant — the type that Argentine billionaire Paolo Rocca is also considering — through its stake in natural gas company TGS SA, but it couldn’t square away the economics. That leaves it with a partnership with one of two contenders: a larger-scale project being led by state-run YPF SA and another smaller, floating site by the Pan American Energy Group, which is 50 percent owned by BP Plc.
“We have to go to a larger scale,” Pampa Chairman Marcelo Mindlin said in an interview at Bloomberg’s offices in New York. “But to do that, you have to join forces. It’s a big investment, so we have to be very careful. But I think we have to take a decision in the next three months because the other producers are willing to move forward.”
While any Argentine LNG project won’t be ready to ship cargoes of the super-chilled fuel for years, the plans are key to ambitions to turn the struggling country into a net gas exporter, which would provide a regular flow of dollars to shore up Argentina’s finances. Today, that role is mainly played by the crop industry and Argentina is an importer of LNG.
Pampa is also eyeing construction of a plant that would turn shale gas into urea, creating more local nitrogen fertiliser for crops that would reduce farmers’ needs to import US$1 billion a year of other fertilisers made abroad. In turn, that would help Argentina’s trade balance, a key ingredient for Milei’s government to reposition the economy toward growth.
Pampa is still assessing costs but may be ready to take a final investment decision on a urea plant by the middle of next year.
“It makes all the sense in the world to convert natural gas into urea and reduce imports,” Mindlin said. “We have gas resources for 100 of years, so either we export that gas and we monetise it somehow or it’s going to remain underground.”
A flurry of potential Argentine energy and infrastructure investments are being driven by Milei, a libertarian in his first year in office, after he made a program of tax, currency and customs incentives a marquee section of his sweeping reforms legislation passed earlier in the year.
Mindlin said all investments by Pampa and TGS are being analysed within Milei’s new framework, known by its Spanish acronym RIGI, and that provisions on value added tax are particularly beneficial.
Power
Likewise, Pampa, which is also one of Argentina’s biggest power producers, stands to benefit from Milei’s plan to double down on deregulation of the electricity market by scaling back the role of Cammesa, a government agency that brokers industry supply contracts, including between gas drillers and thermal power plant operators.
“It’s crazy,” Mindlin said. “Right now we are forced to sell our gas to Cammesa and then Cammesa sells the gas to us. So imagine how difficult it is to deregulate such a twisted sector. If they deregulate the consumption of gas for power plants, it would be very positive for Pampa.”
More broadly, Mindlin, like other Argentine business executives, is delighted with Milei’s austerity drive because a smaller government is freeing up financing for the private sector. And much like Milei, he believes the investments that companies make with the money will trickle through the rest of the economy.
“Having a fiscal surplus allows ‘crowding in’ because the government is no longer taking money out of the financial markets,” Mindlin said. “Now, if banking institutions want to lend, they have to find private-sector borrowers. So we could be on the verge of a very strong lending-led recovery.”
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