Lula cites Brazil-Bolivia gas pipeline as outlet for Vaca Muerta gas

President Luiz Inácio Lula da Silva (PT) said this Tuesday (9.Jul.2024) that the Brazil-Bolivia gas pipeline can transport gas from the Vaca Muerta field, in Argentina, to supply Brazilian industrial demand. The statement was made during a business forum in Santa Cruz de La Sierra.

“The Brazil-Bolivia gas pipeline is a strategic asset that can be used to transport gas from the Vaca Muerta field in Argentina to Brazil, meeting the demand of the national industry. It can also contribute to supplying the fertilizer production plants that we want to build in Mato Grosso and here in Santa Cruz de la Sierra.”these.

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The idea has been floated by the government since March, which is considering importing natural gas from Argentina to increase supply in Brazil. The idea under discussion was to bring shale gas produced in the Vaca Muerta reserve, in the west of the country, through Gasbol (Bolivia-Brazil Gas Pipeline), which has idle capacity due to the drop in Bolivian production.

Brazil broke a record in natural gas production in 2023, reaching 150 million m³ per day. The problem is that half of this production is reinjected into wells as a strategy to increase oil extraction and due to the lack of infrastructure for outflow and transportation. As a result, the country resorts to importing gas from Bolivia (through Gasbol) and other countries, by ship.

Gasbol is connected to other gas pipelines within Brazil and Bolivia, including a pipeline that carries gas to Argentina. However, the gradual depletion of Bolivian reserves has reduced imports to both countries and is expected to cease by the end of the decade.

Studies to import Argentine gas are being carried out by Petrobras. Using Gasbol would be a cheaper model to import gas from Vaca Muerta, since it is an existing infrastructure. However, this would depend on an agreement between the three countries: Brazil, Argentina and Bolivia.

Lula arrived in Santa Cruz de la Sierra, the country’s main economic hub, on Monday night (July 8). He was received by Arce on Tuesday (July 9) with the honors of a head of state.

The trip takes place after the Mercosur summit, in which the Andean country was officially recognized as a full member of the bloc. The Bolivian Senate approved the application for membership on July 3, in a victory for the Arce government. Lula returns to Brasília on the evening of Tuesday (July 9).

Watch Lula’s full speech (34min55s):

SHALE GAS

Vaca Muerta is considered the 2nd largest unconventional reserve in the world. It is a geological formation rich in shale gas and oil. Shale is a type of metamorphic rock that has a foliated appearance and can harbor gas and oil in cracks.

To extract gas from this type of location there is a process considered very harmful to the environment, because it is necessary to break the soil, in a system known in English as “fracking”derived from “hydraulic fracturing”.

In this type of process, it is necessary to drill vertically into the soil to a certain depth. Then, the drill moves to the horizontal direction to fracture the soil, inserting water and chemicals and thus releasing gas and oil that may be present. “taken” between the rocks.

Shale gas is widely exploited in the United States and has been a cheap source of energy in recent decades to boost American economic growth. But there are concerns about its impact on the environment.

This exploration is not regulated in Brazil and has already been the subject of court decisions in Bahia and Paraná that suspended exploration activities through fracturing in areas auctioned by the ANP (National Agency of Petroleum, Natural Gas and Biofuels).

In March, during a meeting with investors in Houston, Minister Alexandre Silveira defended a broad debate on the possibility of exploring shale gas in Brazil.

“We have great onshore potential. In Minas Gerais, for example, we have the potential for a gas that is the largest source of energy in the United States and Argentina, which is fracked gas. And we have to discuss this again in some way and have a dialogue.”he stated.

PIPELINE WITH BRAZILIAN MONEY

The possibility of importing Argentine gas had already been considered by the Lula government. The initial idea, however, was financial with resources from BNDES (National Bank for Economic and Social Development) an extension of the Presidente Néstor Kirchner Gas Pipeline, inaugurated last year by the Argentine government.

The pipeline will take gas from Vaca Muerta, in the west of the country, to the province of Buenos Aires. A second section is to be built to take it to the province of Santa Fe, in the north of the country, from where it would be possible to build branches for import to Brazil and Chile.

Lula arrived at promise the financing of the 2nd section to the then Argentine president, Alberto Fernández, in January 2023. Even before the PT member confirmed Brazil’s decision, however, the Argentine government had already anticipated in 2022, after Lula’s election, saying who would receive Brazilian money for the gas pipeline.

On June 26, 2023, Lula spoke again about the project and said he was “very satisfied” with the perspective “positive” for BNDES to finance the work. TheTalks about financing cooled after the inauguration of Argentina’s current president, Javier Milei.