The bad sign of natural gas prices is worrying

The imminent beginning of spring brings with it the low season in terms of the domestic gas market where supply prices are already anticipated for the fluid to the point that from The main operators are afraid that the price signal for this summer season is really low, to the point of putting investments under threat and leading to a drop in production in a short time.

The country has two very different periods of demand: winter when national production is still deficient and imports are required; Y the temperate months of the year in which demand falls to 50 million cubic meters per day.

This it causes an oversupply and therefore the price paid for the gas drops. At the end of last summer in the spot contracts values ​​close to 2 dollars per million BTU were implied, which implied that gas was sold for less than what it had cost to produce it.

Given this scenario, since Several operators have already signed export contracts with Chile at a value that represents for the neighboring country the possibility of buying a gas at offer prices, almost 30% cheaper than last year. But for national companies it works like a “bird in hand” in the face of the possible collapse of domestic prices.

In dialogue with “Energy On” YPF Executive Vice President of Gas and Energy, Marcos Browne, explained that "the important thing is that the equilibrium price signal continues to encourage developments that this is what we are most concerned about from the company."

To Chile for 3 dollars
The first anniversary of the resumption of gas exports Natural Argentine to Chile will arrive in a few days but with a somewhat bitter taste for many of the Argentine oil companies for the prices set in the last contracts around 3 dollars.

This reduction in the price of Argentine gas, which last year was scheduled for this time at an average of $ 4.20 per million BTU, It is due to two contributing reasons that Chilean buyers have already learned and are taking advantage of.

On one side is the gas oversupply in Argentina that from September to April is marked and has led to the closure of producing wells in the absence of buyers.

This need to place production is what led many firms such as YPF and Tecpetrol to agree sales contracts in which they quote the price of their gas at the wellhead at 3 net dollars, that is, after the withholding discount that is equivalent today to almost 7% of the value.

The second factor in the price drop is the concentration of Chilean demand in a gas pipeline with a narrow capacity such as Gas Andes. The system that connects the Mendoza area with the metropolitan area of ​​Santiago de Chile, has the capacity to transport up to 5 million cubic meters of gas per day, but in the sum of the export authorizations given by the Nation, authorization peaks have been reached of up to 20 million cubic meters per line.

Given the clear impossibility of specifying all authorized shipments, Chilean firms end up prioritizing the contracts in which they agreed the lowest prices, thus bringing the Argentine fluid back down.

"With Chile there is a free game of supply and demand where there is more than one offering and there are few who buy from the other side and just as the market has an equilibrium price here, the same goes for Chile. The truth is that today the game is totally free, of supply and demand, and if we finish defining a price in that order, it is because of what is happening with the prices, ”Browne said and recalled that gas for plants in Argentina was placed last summer at $ 2.80.

The Vice President of Gas of YPF explained that “Chileans also have the opportunity to sign with more than one and then what happens is very free. This year we will see how productive capacity reacts, if there are as many surpluses as last year and if Chile takes as much as last year ”. And he explained that "to the extent that Chile takes more, the balance between supply and demand spicy a little more, then we must see where it effectively ends up being."

From Resolution 417/19 included the obligation to publicly inform the values ​​of signed contracts. Based on this information, it is not only that the price has declined, but also establishment of a kind of seasonal prices that differentiate the gas to be delivered in September, from the period of lower demand that goes from October to April and even a greater jump for the gas of the winter months in which it is appreciated in more than 50% to reach $ 4.70 per million BTU.

Local stage
With contracts to Chile in sight from several companies on this side of the Andes, it is already speculated on what the price path for this first summer may be in the local market and There are few firms that already take for granted that the average value will be below $ 2.50 per million BTU, seriously damaging the price signal sought to advance new investments.

This is why from several firms and Browne himself it is recognized that The panorama in the segment of natural gas production is that production will begin to decline from the loss of a price that makes new developments profitable and that also mitigates the marked impact of natural decline that the shale segment possesses, which will make it very difficult for the next winter for the country to reach the 144 million cubic meters it recorded last July.

In the search of the Brazilian market to add volume and prices

Both YPF and Tecpetrol, the oil company of the Techint Group, are looking to refloat the work of the gas pipeline to Porto Alegre, a work that was about to be tendered in 2001 but succumbed first to the heat of the economic crisis and then to the decline in production.

For the two oil companies the possibility of specifying the gas pipeline that an Argentina with the south of Brazil It represents a great opportunity for Vaca Muerta gas, given that it would considerably expand the potential demand for that gas when it reaches a densely populated and industrial area.

At the moment in Brazil the only existing connection is that of Uruguayana, a small gas pipeline that at the beginning of the year has already started receiving gas from the Neuquén Basin, thus marking the restart of an export path with which it also seeks to improve the gas price signal.