(Bloomberg) -- Brazil is moving forward with plans to import natural gas from Argentina’s Vaca Muerta formation in a sign that bilateral business deals can overcome a complicated political relationship.
Brazil’s energy ministry signed a memorandum of understanding with Argentina on Monday to identify necessary infrastructure to increase natural gas supplies, Brazil’s ministry said. Brazil expects the volumes imported from Argentina to reach 30 million cubic meters a day by 2030, and are part of a wider plan to use the fuel to accelerate industrial growth, according to the ministry.
The deal shows how business deals between Brazil and Argentina are able to move forward even as Argentine President Javier Milei challenges efforts by his Brazilian counterpart Luiz Inacio Lula da Silva to be a major player on the global stage.
The two leaders have been locked in a public battle since last year, when Lula deployed a team of campaign advisers to work for Milei’s election opponent and the Argentine lumped his neighbor into a group of “communists” with whom he wouldn’t work.
The memorandum of understanding creates a bilateral working group to identify the measures needed to make the supply of Argentine natural gas to Brazil economically viable. Argentina also needs to secure a market for its vast gas reserves to accelerate production growth.
The gas agreement should enable Brazil to buy 2 million cubic meters per day of gas by early next year from the Argentine provinces of Neuquen and Rio Negro, and reach 10 million cubic meters over the next three years. Brazil estimates that the gas from Vaca Muerta could cost about half the current average price of $14 per BTU.
Initially, a pipeline that goes through Bolivia would be used to ship the gas, but transportation costs that are a key issue still need to be resolved, according the ministry. Bolivia used to supply both Brazil and Argentina with the power-plant fuel until its production shrank.
Other transportation infrastructure options to expand Argentine gas flow to Brazil could include new pipelines that could go through Argentina or even through Paraguay, and liquefied natural gas shipments from Argentine terminals to terminals on Brazil’s coast, the official said. Argentina’s energy ministry didn’t immediately respond to a request for comment.
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