April 1, 2020 |
Low energy prices and a shrinking economy deter investors from preparing bids
Argentina's Energy Ministry has suspended multi-million dollar auctions to build a natural gas pipeline and a high-tension power transmission system as a worsening economic and financial crisis and low energy prices discourage bidders.
"Both of the auctions have been pushed back," a source at the ministry told LatinFinance on Tuesday.
The source, who asked for anonymity because the decision was not yet public, did not know when the auctions would be rescheduled.
The pipeline project, announced last year, had drawn interest from some of the country's biggest companies, including Corporación América, Pampa Energia and Techint Group, as well as the Chinese companies Gezhouba Group and China Petroleum Pipeline Engineering.
The auction was delayed twice last year after a decline in gas prices led companies to ask for more time to calculate returns on investments. The calculations have become harder to make since then as Argentina edges closer to defaulting on more than $100 billion in debt, pushing up the cost of financing for companies in the country — and tightening their access to capital.
"Oil companies are starting to have negative cash flows in Argentina," said Hugo Giampaoli, a partner at GiGa Consulting, a energy consulting firm based outside Buenos Aires. "They can't keep their operations going."
The original project called for investing $2 billion to build a pipeline of more than 1,000km from Vaca Muerta in the southwestern province of Neuquén to near Buenos Aires. The two-year project would add 40 million cubic meters per day of transport capacity, broken down into two stages. The first would cost $800 million and add a little more than a third of the total envisioned capacity.
The government also suspended an auction for a $650 million public-private partnership (PPP) to build and operate a 490km high-tension power line, saying in a statement that a lack of access to credit at reasonable interest rates has pushed up construction costs and discouraged bidders.