Argentina to export LNG to Germany in $7-billion deal

Southern Energy (SESA), a consortium of Pan American Energy (PAE), YPF, Pampa Energía, Harbour Energy, and Golar LN, signed a framework agreement earlier this month with Germany’s Securing Energy for Europe (SEFE) for the long-term sale of LNG. 

Under the agreement, SESA would supply 2 million tonnes/year (tpy) of LNG over an 8-year period starting in late 2027.

A logistical key to the deal líes in the Hilli Episeyo, the first of the two FLNG vessels SESA will install in the San Matías Gulf, Río Negro province. The Hilli Episeyo is expected to begin operations offshore Argentina in late 2027.

LNG volumes committed to Germany cover more than 80% of the vessel's 2.45-million tpy production capacity, and over 30% of the total 6-million-tpy capacity of the two vessels combined.

Rodolfo Freyre, chairman of Southern Energy, said the agreement “will constitute the first large-scale sale of LNG from Argentina and represents a milestone for the future development of the natural gas reserves in Vaca Muerta."

Frédéric Barnaud, chief commercial officer of SEFE, said the consortium’s first LNG agreement with a South American supplier “not only contributes to the geographical diversification of our portfolio, but also strengthens Europe's energy security."

The SESA consortium confirmed an investment of more than US$15 billion to operate for 20 years in the San Matías Gulf. Projections indicate that between 2027 and 2035, total exports could reach US$20 billion.

A long-term agreement would provide the necessary demand guarantee to justify infrastructure investments. The project will require the expansion or construction of gas pipelines to connect Vaca Muerta's production (Neuquén) with the liquefaction and export point in Río Negro.