Golar LNG has signed a definitive 20-year agreement with Pan American Energy to deploy a Floating Liquefied Natural Gas (FLNG) vessel in Argentina. This ambitious project aims to capitalize on the vast gas resources of the Vaca Muerta shale formation, the world's second-largest shale gas deposit. The partnership is expected to start LNG exports by 2027, positioning Argentina as a significant player in the global LNG market.
Key Takeaways
Strategic Partnership: Golar LNG and Pan American Energy have entered a 20-year agreement to deploy an FLNG vessel in Argentina, tapping into the Vaca Muerta shale formation.
Vaca Muerta’s Potential: The project aims to monetize the world's second-largest shale gas deposit, with significant economic benefits for Argentina.
Regional Impact: The project could influence regional energy dynamics, potentially supplying gas to Brazil and stabilizing the South American energy market.
Future Prospects: This initiative is the first phase of a potential multi-vessel project, with other natural gas producers in Argentina likely to join.
Argentina LNG: A Strategic Partnership
The Agreement: Golar LNG’s agreement with Pan American Energy involves deploying an FLNG vessel in Argentina to tap into the extensive gas reserves of the Vaca Muerta shale formation. The project includes a gas sales agreement from Pan American Energy for the supply of gas and an FLNG charter agreement with Golar, featuring a base tariff and commodity exposure to LNG sales prices.
Project Details: The FLNG vessel, Golar’s Hilli, has a capacity of 2.45 million tonnes per annum and provides an equivalent net tariff of $2.6 per mBtu based on 90% capacity utilization, with an additional commodity-linked pricing element. The Hilli is currently operating in Cameroon and will transition to Argentina after completing its operations in 2026. Golar has the flexibility to substitute the Hilli with another suitable FLNG unit if necessary.
Vaca Muerta: Unlocking Argentina's Gas Potential
Significance of Vaca Muerta: Vaca Muerta, translating to "dead cow" in Spanish, is often compared to the Permian Basin in the U.S. for its vast energy potential. It holds an estimated 16 billion barrels of oil and 308 trillion cubic feet of natural gas, making it the second-largest shale gas deposit in the world. This project aims to monetize these resources, providing an international outlet for Argentina's natural gas.
Project Benefits: The Argentina LNG project will significantly benefit the country's economy by creating value for its gas stakeholders and expanding Golar LNG's global footprint. Karl Fredrik Staubo, CEO of Golar LNG, emphasized that this initiative is the first phase of a potential multi-vessel project, with other large natural gas producers in Argentina likely to join.
Broader Implications and Future Prospects
International and Regional Impact: This FLNG project is not only pivotal for Argentina but also has broader implications for the region. Argentina is exploring the possibility of exporting gas to Brazil via pipelines through Bolivia. Although discussions are in the early stages and face several challenges, this potential development could further enhance Argentina's role as a key energy supplier in South America.
Energy Market Dynamics: Brazil, South America's top crude oil producer, faces a natural gas shortfall as demand continues to soar. This has led to increased LNG imports, especially during periods of suboptimal hydropower conditions. The successful implementation of the Argentina LNG project could help mitigate Brazil's supply issues and stabilize the regional energy market.
Conclusion
The 20-year FLNG partnership between Golar LNG and Pan American Energy marks a significant milestone for Argentina's energy sector. By harnessing the vast gas resources of the Vaca Muerta shale formation, this project positions Argentina as a prominent LNG exporter. The collaboration not only promises substantial economic benefits but also strengthens the region's energy security. As the project progresses, it is poised to reshape the dynamics of the global LNG market and bolster Argentina's standing in the energy industry.
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