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PowerChina eyes rail project to transport oil and gas from Argentina's Vaca Muerta

A Chinese energy company is in talks to build a billion-dollar railway in Argentina that would move crude oil and natural gas from the massive Vaca Muerta shale region to the port city of Bahia Blanca, its president for Argentina said on Thursday.

By Cassandra Garrison

BUENOS AIRES, Sept 17 (Reuters) - A Chinese energy company is in talks to build a billion-dollar railway in Argentina that would move crude oil and natural gas from the massive Vaca Muerta shale region to the port city of Bahia Blanca, its president for Argentina said on Thursday.

PowerChina is in talks with Argentina's state-owned rail entity ADIF for the line, which would act as a crucial link between the isolated shale region and the petrochemical and refinery hub, Tu Shuiping, president of PowerChina in Argentina, said in an interview.

"There is a concrete plan that we have been working on for almost two years. We were talking with people from ADIF to see how the project can be presented and then seek joint financing," Tu said.

Cash-strapped Argentina, which is mired in recession and default, has struggled to capitalize on Vaca Muerta, one of world's largest reserves of shale oil and gas. To continue growing, Vaca Muerta needs greater investment in exploration and production, as well as pipelines, storage terminals, and railways to transport crude and gas.

The project's cost is estimated between $1.2 billion and $1.5 billion, Tu said, adding that China could provide the financing.

The explosion in shale drilling propelled the United States to become the largest producer of crude oil worldwide, but other countries, such as Canada, Russia and Argentina, have not yet been able to capitalize on their shale holdings.

A spokesman for Argentina's ministry of transportation said "there is dialogue with many companies" for Vaca Muerta infrastructure but that plans, at the moment, are undefined. The rail line could also be used to ship sand for hydraulic fracturing, or fracking, and food, Tu said.

Plans for the line stalled over a lack of financing options under the administration of Mauricio Macri, Tu said, but the project appears to be moving forward under the government of President Alberto Fernandez.

PowerChina has 14 active projects in Argentina, including the largest solar park in South America, located in Jujuy province.

(Reporting by Cassandra Garrison, editing by Timothy Gardner)

((Cassandra.Garrison@thomsonreuters.com; +54 11 5830 7443;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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