Bolivia transit deal opens door for Brazil to import natural gas from Argentina

Brazil will import natural gas from neighboring Argentina's Vaca Muerta onshore play after TotalEnergies and Matrix Energy reached transit agreements to access pipelines operated by Bolivia's Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, according to Brazil's Mines and Energy Ministry.

"This milestone demonstrates the Brazilian government's commitment to diversifying energy sources and strengthening the country's energy security," Mines and Energy Minister Alexandre Silveira said on Nov. 27. "Integration with our South American neighbors will help meet demand from industry and the population, promoting sustainable development and generating revenue and jobs."

The transit agreement followed a bilateral agreement that Brazil and Argentina signed in mid-November on the sidelines of the G20 conference in Rio de Janeiro, with the two countries creating a working group to study potential natural gas transport routes. Argentina recently completed a reversal of the Nestor Kirchner and Gasoducto Norte gas pipelines to open a pathway for about 15 million cu m/d to head north.

One of the quickest routes to get gas trade going between Argentina in Brazil is via the Gasoduto Bolivia-Brasil pipeline, or GasBol. GasBol has installed capacity to transport about 30 million cu m/d between Bolivia and Brazil, but has operated at less than its capacity in recent years because of reduced gas output in Bolivia.

Brazil's National Petroleum Agency, or ANP, in August authorized TotalEnergies to import up to 20 million cu m/d from Argentina via Bolivia. That followed comments by Mines and Energy Minister Silveira during an official visit to Bolivia in July that companies in Argentina could have about 4 million-6 million cu m/d available to export to Brazil via the country in the fourth quarter of 2024.

Alternative routes to get Argentinian gas into Brazil include LNG shipments, construction of a new pipeline via neighboring Paraguay and direct connections with Argentina via Brazil's Rio Grande do Sul state and Uruguay, according to the Mines and Energy Ministry. Brazil and Paraguay's governments have already discussed a pipeline, which would secure supplies for Paraguay and allow for seasonal gas flows between Argentina and Brazil.

New Gas Market

Brazil is on the hunt for new natural gas supplies amid a transition to its more-liberal New Gas Market regulatory regime, which was implemented in 2021. However, development of Brazil's gas market has been undermined by the slow rollout of new regulations required by the regime, the lack of offshore gas export infrastructure and extensive use of reinjection that has kept domestic gas prices high.

Companies operating in Brazil produced a record 169.9 million cu m/d in September, topping the previous mark of 162.1 million cu m/d set in November 2023, the ANP said in a production report released on Nov. 1. However, the market received just 54.4 million cu m/d available for commercial sale as 83.6 million cu m/d were reinjected to manage oil reservoirs and improve recovery.

Gas supplies should get a boost in coming months after Brazilian state-led oil company Petrobras started commercial operations at the Complexo Energias Boaventura outside Rio de Janeiro in mid-November. The complex includes a treatment plant that will process up to 21 million cu m/d from offshore subsalt fields connected to the facility via the Route 3 export pipeline, which has installed capacity to transport 18 million cu m/d.

Imports from Argentina also appeared to represent Brazil's best chance for a near-term supply shock amid delays to several major offshore projects.

Norway's Equinor plans to start production from the Raia Manta and Raia Pintada fields in the Campos Basin's BM-C-33 block in 2028, according to the company. That was about a year later than the initial plans. The fields hold about 1 billion barrels of oil equivalent in place and will produce about 16 million cu m/d at full capacity, with output transported to shore via pipeline.

Petrobras also said on Nov. 21 that it would push development of its Sergipe-Alagoas Deep Water project until 2030 or later under the company's $111 billion investment plan for 2025-2029. Petrobras has faced challenges to build two floating production, storage and offloading units, or FPSOs, for the project and intends to restart the tender process before the end of 2024.

The Sergipe-Alagoas Deep Water project is estimated to produce about 240,000 b/d and 18 million cu m/d, with an export pipeline connecting the fields to onshore treatment plants, according to Petrobras.