Alternative systems in Argentina

What are the advantages of developing virtual pipelines in Argentina?
For many years, we have been insisting that conventional gas pipelines have reached their limits in Argentina and many other places in the world. Nowadays in Argentina, it is impossible to connect new users without subsidies. Half the population does not have access to gas. It is not possible to connect all users to the network through conventional methods, since these have reached their maximum expansion levels. We need to find new innovative solutions and it has to happen now.
Constructing many new pipelines will take years. Producers need to monetise natural gas. Argentina is lucky to already have some of the infrastructure in place. Considering the current rhythm of investments, in a couple of years, we might be able to reach self-sufficiency and will have an excess of natural gas.
It is important to think about how to connect the rest of the system and how to make the most out of the existing resources. There are many exploratory wells and wells in remote areas that could be easily monetised. This is our aim, together with taking natural gas to different industries, power plants and populations that are outside the connected system.
The virtual pipeline is already operational and it is a reality. Virtual pipelines are the most efficient way for distributors to expand their coverage. We are supplying the Anchoris power plant with gas from wells that had been abandoned or put out of operation for different reasons. However, this is only the tip of the iceberg. We are already in talks with the Mendoza provincial government to bring natural gas to areas that are currently supplied with LPG.

Is the Anchoris power plant cost-competitive?
It is one of the cheapest plants in the system in terms of marginal costs in thermal energy because it uses natural gas during the whole year. It is not subject to the restrictions of gas pipelines and the plant can operate continuously throughout the whole year, which is a great advantage. Moreover, Anchoris is located in an area of great demand that can only be supplied through virtual pipelines.
Until now, the concept of distributed energy was associated with inefficiency. When you wanted to put a small power plant in an area with no pipeline, you could only use diesel. The use of virtual pipelines allows for a distributed energy plant to have the same cost structure as a main plant. It is a very important alternative.

How efficient is your virtual pipeline approach?
What we call distributed production of LNG is a very efficient system. In the US, we are working with a company that connects wells in the Marcellus Formation with industries. That is the same thing that we are doing here. We are supposedly competing with the most efficient natural gas pipeline network in the world. We are sometimes a better alternative.

Is there a limit in the distance that virtual pipelines can cover?
No, and the best example is the province of Corrientes, which is currently developing a connection plan through LNG. It is a province with relatively low annual gas consumption and one of the warmest areas in Argentina. The Gas Nea pipeline is nearby, but crossing the Paraná River to reach the city of Corrientes would cost millions of dollars. It is impossible to think of connecting a rice producer who is 50 kilometres away from the pipeline.
Galileo provides a solution that does not imply the construction of a natural gas pipeline network. We believe that any new user connected to the Argentine system does not have to be connected to a regular pipeline.
Moreover, we are expanding our platform. This 3.0 technology can transform fossil fuels and biogas into LNG whenever we want and without any technological adaptations. Nothing needs to be modified. We have the technology to condition the gas before it is transformed into LNG. Once it enters the virtual network, natural gas and biogas are the same.
Also, our entire truck fleet that moves the LNG also runs on LNG. This makes the process more efficient and convenient. By using bio-LNG, the carbon footprint will be negative. Biogas monetises methane emissions. We can create a very sustainable and efficient platform.

How have operators responded to Galileo’s initiative?
All producers have signed contracts or are negotiating. Everybody wants to lose the least amount of natural gas. We are working strongly with everybody. An aggressive drilling campaign is coming and we hope to be an important part of this.

How are you positioned in Vaca Muerta?
Anchoris is located in the south of Mendoza, close to Vaca Muerta. Neuquén combines hydroelectric energy with power plants that produce power very close to the fields. We decided to move away to have ensured demand.
We have two technical bases from where we operate virtual pipeline networks: one in Malargüe and the other in Añelo. With these two, we cover the entire area.

How do you think the share of gas in the domestic energy matrix will evolve in the midterm?
Galileo divides the history of natural gas in conceptual phases. Phase 1.0 is gas pipelines and 2.0, is LNG for large overseas markets. Both of these phases entail a centrality and go from one source of natural gas to one large consumer centre. Phase 3.0 is a network of multiple sources and multiple consumers of natural gas, bringing independence to the sources and the consumers that could be conditioned by the scale of their production and consumption, respectively. The first two phases coincide with the discovery of Loma de la Lata.
During phase 1.0, natural gas represented 22% of the energy matrix. We went from 23% at the beginning of the 1980s to 50% by the mid-1990s. Now that Vaca Muerta’s reserves have increased, the share of gas in the energy matrix and in local consumption should be higher. The government is projecting a very attractive price for this to happen. Gas might be able to go up 10-15 percentage points in the energy matrix.
Half of the population does not have access to natural gas. Load transport is a huge pending matter as well. If we can transform it, the cost of gas will drop by 20%. The impact on the economy will be very strong. When the CNG project started in Argentina, there were a lot of technological barriers. Everything exists now. We have the trucks, platforms, stations and so on. It will be an easier process. We can rapidly convert the matrix.

How has the market for gas compression equipment evolved?
Galileo has installed a lot of horsepower. The company is offering something different and innovative called distributed compression, which is a different way to operate a well and field, allowing you to maximise production from the well and minimise investments. Instead of installing big compression plants, we install many compressors at each well, which allows us to maximise production without being contaminated by neighbouring wells.
The distributed compression model is a natural gas production system that overcomes expensive traditional gas gathering by installing high-discharge-pressure wellhead compressors. This change of paradigm frees up operating conditions in the wells, maintains optimal wellhead pressure values and increases the pressure in the network leading to the main gas pipelines. Moreover, it reduces pipeline diameters and capex costs in comparison to a conventional system.
Those who have advanced the most in these developments have already adopted this system. We are installing great compression capacity in several fields. The efficiency of this solution has been proven.

What is the outlook for Galileo’s business at the global level?
The gas offer is increasing significantly, especially because of shale. On the other hand, flaring is an important problem in many countries in Africa and the Middle East. Africa burns more diesel than the natural gas flared in its fields and there is no infrastructure connecting all fields with consumption centres. Every city is an island. There is no national network. We are trying to bring those areas together through virtual networks.
The same happens in the US, which has rapidly increased natural gas production, while internal consumption has not changed. Only power generation consumption has slightly increased. The pipelines have reached their limits. There was never a shortage of natural gas. You cannot increase consumption without virtual pipeline networks.
We are strongly working with local partners. We are creating very important projects for the Middle East, Africa and the US to cover all the areas of 3.0 gas, including virtual pipelines and remote LNG production.

What is Galileo’s R&D strategy?
Research and development is our main axis. We always show the technological innovations that we have been incorporating. It has made possible the development of all our different niches. We always interact a lot with our clients and potential clients to identify needs. Our development process is strongly linked to commercial development. We generally identify necessities first. All our solutions have been natural solutions for problems that producers or industries had.
We have a modular platform of products. They are all very similar with different components, which allows us to develop new applications. For example, there is no shale in Europe, but 14,000 biogas plants will be closed because they cannot compete against solar or wind energy. However, that gas could be used in cars. This is how our logic works. We are looking for niche opportunities in each market.

Are there opportunities to apply new technologies in Argentina?
We started in the natural gas downstream sector. We always believed that it would be difficult to introduce our innovations in the upstream sector, but it was actually a lot easier than we thought.
Many times, the producers are conservative because nobody offers them solutions. The industry is conservative. Every new thing obviously takes time, but we have managed to impose new concepts such as virtual pipelines and distributed compression.
Today in congresses, local producers present the solutions that we have developed together. We are very proud of this. The industry has grown a lot. Many times problems are more related to potential than solutions. There is always space for new solutions. A lot of testing gas will be generated with all the expected drilling. We are trying to channel this. Everybody wants to join.

What are your insights on large-scale LNG projects?
The distributed production of LNG is the cheapest option. The cheapest LNG comes from the US. The gas in Marcellus has to go to the hub. To get there, a lot of things have to happen. We understand that distributed production is the most efficient solution. It is small-scale, but with the sum of many plants comes the same result. Our systems are very efficient.

How have regulatory and policy changes impacted Galileo in the past two years?
Galileo was born as an Argentine company and we are headquartered here. We have always bet on this country. We have generated defences for all the different changes in the economy. Our income is distributed. For many years, 95% of what we were doing was overseas, but nowadays, Argentina represents almost half of our income.
There is certainty with the current government. If producers and users feel the same, the demand will grow. We are very optimistic. There is a lot to be done after so many years of things not being done. It is fertile ground.

What are your domestic and international objectives?
We are generating joint ventures with very important players to replicate this model in other areas. We are already almost operational in the US with a company called Edge Gathering Virtual Pipelines, which offers 3.0 gas in the US. That company needs thousands of pieces equipment.
In Africa, we have a company that is just starting called Vigal. It will do the same 3.0 gas as in the US, which means connecting a certain volume from wells currently outside of the system with users that cannot reach the system. It complements pipelines. Africa does not have heating needs and there are not many industries. Power plants are placed where there is a need. The more power plants, the better, as populations are spread out.
Moreover, we will try to promote CNG for cars. It has been successful in Latin America, Pakistan and India. In Africa, if there is infrastructure, it might help as well.
Our strategy is to consolidate the service area for virtual pipelines and support our technological platform. We are strongly investing in products. In 2016, the Cryobox-Trailers for distributed LNG production did not exist. We developed a very innovative and revolutionary concept. They have a daily processing capacity of 750,000 cubic feet [21,240 cubic metres] of natural gas. Every unit supplies approximately 10,000 gallons [15 tonnes] of LNG right from the wells. Oil and gas producers can add, remove or relocate units to fit the natural gas flow rate of the producing wells or meet LNG consumer demand.
We have also developed a very sophisticated software platform, which is not visible and controls virtual pipelines.
It is difficult to quantify the investment for our research and development. That is our DNA. We are very passionate about innovation. We do not want to do the same as everybody else.

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