Argentina’s new planned gas program will be key to increase cash flow generation to develop the country’s vast natural gas reserves, YPF chief executive said earlier this week.

According to Sergio Affronti, the Gas Scheme 2020-2024 “provides predictability in terms of price and normalizes a gas market that in recent years had presented severe distortions. On the other hand, it allows us to efficiently satisfy different segments of the demand.”

Argentina’s minister of productive development Matias Kulfas said in a presentation to O&G executives last week that the initiative will be launched in the coming months. Sources believe it will be made official in September/October, to enable increased supply next winter.

Under the tender program, gas producers would supply around 70 million cubic meters per day (Mmcm/d) to distributors and power generators through Cammesa – the state-run electricity wholesaler – below a government-set price of roughly $3.4 per million British thermal units (MmBtu). The companies would secure direct supply contracts with distributors and power generators.

Producers must commit to sustaining or increasing 2020 production and will be allowed to increase exports in non-winter period.

Through direct subsidies, the government will cover the difference between the prices awarded in the tenders and payments coming from distributors and power generators, which are based on the final prices they in turn perceive.

While end-user natural gas and power prices will remain frozen at least until December 31, it’s unclear whether the government will conduct a new price-adjustment framework starting next year.

Kulfas said the scheme seeks to boost immediate investments in gas production in all basins in the country, while satisfying domestic gas demand with indigenous production, reducing reliance on liquefied natural gas imports.

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