Argentina Will Increase Domestic Natural Gas Prices and Review Subsidies

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--The new Argentina government has announced natural gas price hikes to promote investments in the energy sector as part of its liberalization plan.

Argentina's Energy Minister Eduardo Rodríguez Chirillo announced to a public audience on Monday that natural gas prices will increase by more than 100% in the next three months to reduce the burden on the state.

According to the minister, consumers across Argentina pay only about $0.7 per million BTU, or 17.5% of the price of natural gas ($4 per million BTU), leaving the remaining 82.5% to be covered by the state.

As a result, the government will increase natural gas prices by 33% each month in February, March, and April, with the objective of bringing price parity with international standards and reducing government losses. According to the minister, Argentina has lost US$30 billion in the last 10 years due to low domestic energy prices.

As part of this policy change, the government will also review the subsidies, to provide the service only to the most vulnerable with some regulation.

Since coming to power in December, the new government of Javier Milei has scrapped subsidies across sectors, especially in energy, to reduce the burden on the state.

For Rodriguez, the subsidy policy implemented by the previous governments discouraged the development of large infrastructure investments. As a result, this left the state as the main developer of key assets, such as the newly inaugurated Nestor Kirchner gas pipeline, which has the capacity to transport 11 million cubic meters of natural gas per day from Neuquen to Buenos Aires.

With reduced subsidies, the government expects to attract more investments to the energy sector, especially Vaca Muerta, the world's second-largest shale gas reservoir.

Over the last few years, energy developments in Vaca Muerta have yielded higher volumes of natural gas. In 2014, shale gas represented only 1.1% of the nation's total output, while in 2023, it was 43.6%. As conventional natural gas production has dropped, shale output has picked up those losses, helping Argentina maintain stable production levels.

Yet, Vaca Muerta's remote location represents a major transportation challenge for Argentina. The limited pipeline capacity to the country's ports restricts the development and prospects of the shale area. Therefore, the construction of new midstream infrastructure in Vaca Muerta, especially from the private sector, will be crucial for higher production volumes under Milei's new government.

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