Buenos Aires — At an event this week celebrating the 115th anniversary of the discovery of oil in Argentina, Energy Minister Flavia Royón, announced that the government obtained financing for a total of $1.22 billion from international organizations to advance the construction of the second phase of the Néstor Kirchner gas pipeline, a key infrastructure project to reverse the energy trade balance.
However, the loans with the Brazilian Development Bank (BNDES) and Latin American Development Bank CAF have not yet been confirmed, and in the case of the former, it has not even been formally requested, Bloomberg Línea can reveal.
How will the Néstor Kirchner gas pipeline be financed?
“Regarding the second section of the Néstor Kirchner gas pipeline, we have obtained financing for $689 million from the Brazilian National Development Bank (BNDES) and $540 million from CAF,” Royón said at the event organized by the Argentina Oil and Gas Insitute (IAPG). And she assured that the project with conservative calculations, “allows us to project a saving of $20 million per day, with which the investment will be able to be recouped in one year”.
A source at the Energy Ministry who asked to remain anonymous acknowledged to Bloomberg Línea that the BNDES loan has not yet been closed, and added that it would be confirmed shortly, since they are working out the finer details.
For its part, BNDES stated that “there has been no formal request for financing presented to the BNDES”, although sources at the bank acknowledged that “the Argentine government, through its embassy in Brasilia and Brazilian companies, contacted the BNDES and the Economy Ministry to inquire about possible financing”.
The Energy Ministry also announced that the government has obtained financing for $540 million from the CAF, but that loan is still subject to board approval.
Sergio Díaz-Granados, BNDES president, said on December 2, together with Economy Minister Sergio Massa, that he was pleased to see the progress on the gas pipeline, “because it is part of CAF’s strategy for Latin America and the Caribbean of transition”, and added that “the use of gas in the region is an imperative to reducing poverty and fiscal deficits”.
“I am sure that the CAF board in March of next year will have this project for study and evaluation,” said Diaz-Granados.
How will the pipeline be financed?
The first phase of the pipeline, which will connect Vaca Muerta (Tratayén) with the province of Buenos Aires (Salliqueló), is currently under construction, and is slated for June 2023 completion.
This first phase is being financed by the state, with funds from various sources, including the treasury and the national budget.
The second phase, which will run between Salliqueló and San Jerónimo in the province of Santa Fe, will increase by 25% the transportation capacity of Argentina’s trunk gas pipelines, but the financing must be private and the government claims to already have the funds, but in fact there are still several steps to be completed.
According to the company Energía Argentina (Enarsa), which is in charge of the project’s works, the first stage of the gas pipeline will save $1.46 billion per year in gas imports and the two stages together $2.69 billion.
