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Argentina and Brazil: Gas pipeline extension legal framework

Carlos Alfaro

Argentina and Brazil: Gas pipeline extension legal framework

The Governments of Argentina and Brazil have entered into a Memorandum of Energy Exchange until 2025 establishing the framework to regulate the exchange of electric power and gas between both countries. Under this dialogue, progress is also being made in the negotiations for the financing of stage 2 of Gas Pipeline-President Néstor Kirchner from Argentina and Brazil.

The Argentine Energy Company (ENARSA), the Argentina and Brazilian Ministries of Economy, the Chancelleries and the Argentine Embassy in Brazil and the Brazilian National Bank for Economic and Social Development (BNDES) launched the negotiations for carrying out the financing of the next stages of the Gas Pipeline, which first stage is under construction in Argentina from Vaca Muerta (Neuquen) to Salliqueló, Province of Buenos Aires.
 
The so-called second stage, which will extend from Salliqueló in the province of Buenos Aires to San Jerónimo in the province of Santa Fe as part of the Néstor Kirchner gas pipeline; the analysis of construction work required to take the gas from Vaca Muerta to the center of the industrial demand in the area of Greater Sao Paulo is also being taken into account.
 
On September 5, 2022, ENARSA issued a public call for bids for the preparation of the extended basic engineering of the second stage of the gas pipeline, which will extend from Salliqueló to San Jerónimo. It entails 583 kilometers to be covered with a 36-inch pipeline, which consists of 56,700 steel pipes of 12 meters in length.
 
The works in the second stage will allow a 25% increase in the capacity of the national main gas pipeline transportation system, thus adding value to the reserves of Vaca Muerta.
 
Argentina is currently supplying gas to Brazil through the existing connection between Paso de los Libres and the Thermal Power Plant located in Uruguayana, Brazil. The agreement guarantees that the Argentine network will be available to channel gas to the thermal power plant as long as at the same time the total supply of the domestic market is ensured.
 
This past winter, Brazil’s contribution in terms of electricity imports from Argentina was key to enable savings for the country, and enable part of the return of the LNG ships leased by Argentina and sustain its energy demand at a competitive price.
 
At some moments the demand for imports from Brazil reached approximately 8% of Argentina’s electricity demand, so it was an important contribution.
 
The updating agreement of the energy exchange memorandum will be in force until 2025 and it will be automatically renewed every four years. It allows the use of the Bilateral System of Payments in Local Currencies, implemented by means of the "Agreement of the System of Payments in Local Currencies between the Argentine Republic and the Federative Republic of Brazil", signed on September 8, 2008.
 
In this way, Argentina will be able to continue supplying electric power and gas to Brazil, a country to which it exported more than US$ 1 billion of electric power in 2021 and almost US$ 350 million of gas in various forms so far in 2022.
 
At the same time, this year Brazil guaranteed the maximum capacity to supply electricity to the country at competitive prices for US$250 million, which was made possible through Garabí’s electrical converters.
 
In consideration, Brazil is also expected to upgrade the aforementioned Garabí converter stations, guaranteeing adequate operation for the next decade.
 
The Argentina - Brazil HVDC interconnection, owned by Cien/Endesa Group, demonstrates the advantages of the modular HVDC back-to-back interconnection concept in a project designed to encourage cross-border energy trading between the two countries.
 
The transmission system comprises 490 km of 500 kV AC overhead lines between the two substations of Rincón de Santa Maria in northern Argentina and Itá in southern Brazil, and an HVDC converter station at Garabi in Brazil, near the border.
 
Argentina’s power system operates at 50 Hz, and Brazil’s operates at 60 Hz. The asynchronous interconnection is through HVDC frequency converters in a back-to-back configuration at Garabi.
 
Hitachi Energy’s capacitor commutated converter (CCC)-type HVDC converter technology made it possible to avoid building a synchronous compensator plant at Garabi. Each of the two 1,100 MW phases of the Garabi back-to-back station is divided into two blocks of 550 MW each. The first phase went into commercial operation in 1999, the second phase in 2002.
 
A CCC/ConTune combination in the converters enables secure operation at low short circuit levels, improving reactive power control and providing even and continuous voltage and power flow control. The converter station’s modular construction concept simplifies civil design and ensures an environmentally acceptable solution and shorter delivery time.
 
Each line from Garabi to Itá in Brazil is 354 km long, a challenge for a converter station that guarantees delivery of 1,000 MW into a rather weak point of the grid.
 
This cross-border system enables both countries to utilize electricity resources more efficiently and cost-effectively, increasing system reliability and enabling secondary energy trades. The time schedule for completion of the first phase was only 22 months, a significant challenge for a project of this magnitude.

Carlos Alfaro
Alfaro Law

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