Brazil Discusses Gas Pipeline From Vaca Muerta Shale With Argentina

Brazil is in talks with Argentina about potentially building a $5-billion natural gas pipeline from the Argentinian Vaca Muerta shale play, Brazilian President Jair Bolsonaro said during his weekly live broadcast.

"We are in negotiations with Argentina. Gas from Vaca Muerta. It will happen one day, because it is not easy to start importing gas, you need pipelines," Bolsonaro said, as carried by Reuters.

A pipeline is estimated to cost $3.7 billion in Argentina and another $1.2 billion in Brazil, as per Reuters estimates.

Bolsonaro didn't say how the project would be funded.

A gas pipeline from the prolific Vaca Muerta shale in Argentina's province Neuquén could be one option for reducing natural gas prices in Brazil, according to the Brazilian president.

This year, Brazil is importing a lot of liquefied natural gas (LNG) because of the worst drought in the country in nearly a century.

Brazil is importing so much LNG this year that volumes are close to levels usually seen in countries in Europe and Asia, as the South American country's electricity system grapples with the worst drought in 91 years.

Brazil's electricity mix is heavily dependent on hydroelectric power, which accounted for more than 75 percent of electricity generation in 2020, according to data from the International Energy Agency (IEA).

Brazil has the largest installed hydropower capacity in South America and accounts for two-thirds of the continent's total hydropower capacity.

But this year, Brazil, the most populous country in South America, is experiencing its worst drought in 91 years and is struggling to keep the lights on with hydropower.

At the same time, Vaca Muerta in Argentina is recovering from the pandemic slump and is estimated to hold recoverable resources consisting of 16 billion barrels of oil and 308 trillion cubic feet of natural gas. Those numbers make the Vaca Muerta the world's second-largest shale gas deposit.  

By Charles Kennedy for Oilprice.com

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