JPMorgan, Citi in talks to finance US$1-billion Argentina pipeline

A group of banks including JPMorgan Chase & Co and Citigroup Inc are in talks to lend natural gas producers in Argentina roughly US$1 billion to build a cross-country pipeline, according to two people familiar with the matter.

The banks, which also include Banco Santander SA, are negotiating the syndicated loan with a consortium led by Pan American Energy Group after a similar deal was struck last year for a pipeline and port dedicated to shale oil exports. That project, known as VMOS, is currently under construction. More banks may join the financing for the gas pipeline, the people added.

Pan American, which is half-owned by British oil major BP Plc, holds a 30 percent stake in the consortium, called Southern Energy SA. Argentina’s state-run energy giant YPF SA owns 25 percent. Three other companies, Pampa Energía SA, UK-based Harbour Energy Plc and Golar LNG Ltd also have smaller stakes in the project.

Negotiations are ongoing and terms could still change before an agreement finalizes.

JPMorgan and Citi declined to comment. Santander and Pan American didn’t respond to requests for comment.

Argentina’s Vaca Muerta shale patch is growing fast as President Javier Milei’s free-market reforms have opened up the energy industry to global credit, unleashing investments. The US$2-billion loan for the oil pipeline was the biggest project financing in Argentina’s history, according to JPMorgan.

Southern Energy is now aiming to unlock the Vaca Muerta’s gas potential with Argentina’s first floating liquefaction terminal for natural gas. The pipeline would transport natural gas from Vaca Muerta to the terminal on the Atlantic coast. Argentina holds the world’s second-biggest resources of shale gas, and its daily production averaged the equivalent of about 550,000 barrels last year.

The consortium’s first leased liquefaction vessel, Hilli Episeyo, is set to start production at the end of 2027. The second, MKII, will join about a year later. Combined annual capacity will be six million tons, with many shipments going to Germany.

To start, the vessels will be sent gas from southern Argentina, requiring only small add-ons to an existing pipeline network. But to service them fully, Southern Energy needs to build an exclusive pipeline from the Vaca Muerta, which the banks would finance.

Argentina has ambitions to boost LNG exports beyond the Southern Energy project, but the plans don’t yet have the green light.