Argentina's 'Dead Cow' gas may win out from Brazil's drought

The drought in Brazil is offering a lifeline for Argentine gas drillers, just as the high-demand winter season ends.

While the drought is wreaking havoc on agricultural exporters facing the shallowest levels of the Paraná River since the 1940s on the key shipping lane, power producers could boost exports to Brazil, while low reservoirs they mine hydroelectric power. 

That could be a boon for the country's gas drillers, even in Vaca Muerta, the world's second-largest shale formation.

Brazil may need to import up to two gigawatts of electricity from Argentina, which would increase gas demand in the country's power plants by 10 million cubic metres per day, said Gustavo Mariani, CEO of the main Argentine energy company Pampa Energia SA, in a conference call on results. 

This additional consumption would come at the perfect time, as the demand for heating decreases with the end of the South American winter.

The sale of energy from Argentina to Brazil would significantly improve gas consumption domestically, said Mariani, adding that this will improve volumes for the next two quarters.

Despite its impressive reserves, development at Vaca Muerta has stalled, in large part because investors are wary of strong seasonal changes in demand in Argentina. A

lthough in the cold winter months there is a lot of gas consumption in Argentina, during the other eight months of the year drillers such as Pampa, Tecpetrol SA of billionaire Paolo Rocca and state-owned YPF SA struggle to find clients elsewhere.