Argentina, Brazil Sign Deal for Vaca Muerta Gas

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Facts

  • Argentina and Brazil signed a memorandum of understanding earlier this week on the sidelines of the G20 summit in Rio de Janeiro over the export of natural gas from Argentina's Vaca Muerta formation to Brazil starting next year.[1][2]
  • The deal sets up a bilateral working group to study measures, including infrastructure and logistics routes, to allow Brazil to buy about 2M cubic meters per day by early 2025, and to reach 30M cubic meters per day in 2030.[3][4]
  • Gas will initially flow through the Bolivia-Argentina pipeline and reach Brazil through the Gasbol pipeline, which connects Brazil to Bolivia. Additional points of connection are under consideration.[2][5]
  • This comes despite the fraught relationship between their leaders, Javier Milei and Luiz Inácio Lula da Silva, with Brazil's energy minister adding that the deal 'unequivocal[ly]' shows that bilateral partnership stands above ideological differences.[4][6]
  • Talks over the agreement had begun last year, prior to the election of Milei. While Argentina has an oversupply of natural gas, Brazil hopes to increase its gas supply to lower the price.[7][2]
  • Located in the Argentine Patagonia, Vaca Muerta is the world's second-largest shale gas reserve and relies on the use of fracking. Earlier this month, Brazil pledged to reduce its use of fossil fuels, including shale gas.[1][7]

Sources: [1]Reuters, [2]MercoPress, [3]upstreamonline.com, [4]Bloomberg, [5]Oil & Gas Journal, [6]Buenosairesherald and [7]The Brazilian Report.

Narratives

  • Narrative A, as provided by The Rio Times. Regardless of the political differences of their leaders, Argentina and Brazil are on the cusp of a transformative win-win energy partnership centered on natural gas exports. Potential economic benefits overcome environmental concerns over shale gas extraction, as this deal may boost industrial competitiveness and energy cooperation in South America.
  • Narrative B, as provided by Guardian. Vaca Muerta and its shale fields are more of a curse than a blessing to Argentina, as too much focus on them has diverted investment further away from renewable energy — and into dirty and dangerous fracking instead. With this new agreement, Brazil may also fall into this trap despite its renewable energy capacity.

Predictions