Argentina launches Gas Scheme 2020-2024: What will drive price bids? Report

Insight 27 November 2020

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Report summary

The Argentine government finally launched the Gas Scheme 2020-2040, which will be a tender to contract up to 70 Mcmd and incremental volumes in winter for four years starting deliveries in January 2021. This tender aims to provide foreseeability of contracting, payments and pricing, and through this revive investments in gas production to reduce gas, diesel and LNG imports. Despite the price cap imposed, this tender is a market pricing mechanism much better than historical arbitrary price settings by the Argentine government or price subsidies to producers. It also will be the biggest contracting deal in Latin America summing 117 bcm in the next for years, which would represent up to 16.6 US$ billion dollars of gas sales.

Executive summary
Introduction
Features of the Gas Scheme tender
Price bid mechanism
Dealing with legacy price subsidies
Pricing strategies
- Internal rate of return drivers
- Marginal cost of supply
Final remarks

Tables and charts

This report includes the following images and tables:

Volumes required in Gas Scheme 2020-2024 by basin and type vs total Argentina gas demand
Uncontracted committed production capacity versus Argentina’s remaining gas demand from the Gas Scheme 2020-2024
Commercial details of the Gas Scheme 2020-2024

Net present value divided by the gas sales at a 10% interest rate must be lower than US$3.21/mmbtu
Maximum price calculated based on 3 Mcmd of injected volume from Neuquen to GBA
Nominal and adjusted annual revenue for the maximum price with 3 Mcmd
Price comparison between local and international references and price cap from Gas Scheme 2020-2024
Bullish and Bearish factors for price bids
Neuquen compositve supply cost curve (2024) vs gas demand requirements