In Argentina there are multiple prices for gas. There are auctions, bilateral contracts, emerging prices from the Gas Plan and specific operations. However, we lack something more powerful and necessary: a single, transparent and widely accepted reference that allows us to synthesize at all times the balance between supply and demand (including demand from the external sector, which generates foreign currency).
The difference is not minor. Today it is impossible to know the price of gas in Argentina with a click. It depends on the segment, the contract, the specific operation, and, many times, requires consulting those who actively participate in the sector. This fragmentation does not prevent the market from functioning, but it limits its depth and its ability to attract investment.
Henry Hub in the United States was born as a result of the operation of a large, deregulated market with an infrastructure that facilitates transactions in a certain geographic location. In this way, the economic implications are evident: the existence of a reference point organizes expectations, reduces uncertainty and facilitates decision making, including the possibility of agreeing on future prices.
It is true that liquidity is not created magically, establishing a “hub” by design. In part, causality is reversed—that is, successful hubs emerge naturally where there is volume, diversity of participants, and flexibility and contractual freedom. But it is also true that the absence of a reference point makes coordination difficult and delays the arrival of that liquidity. In this sense, moving towards the establishment of a Creole hub should be an objective of the public and private sectors.
Argentina does not start from scratch. It has a productive base in strong expansion, driven by Vaca Muerta, and growing interest from international investors within the framework of the RIGI. In this context, the creation of a clearer price reference does not replace the need to have macroeconomic and exchange rate predictability, but it would contribute to improving risk management and positioning ourselves as a more relevant player.
The discussion regarding the location of that hub also admits nuances. Proposals such as Bahía Blanca or certain areas of Río Negro may be viable, as long as supply (coming mainly from Vaca Muerta or the Austral basin) and demand (for domestic consumption and for the export of LNG) can converge there. Despite this, it is not essential that the hub be strictly physical: it could also be defined as a virtual point within the transportation system, as occurs in other markets. The important thing is not so much the physical location, but the ability to concentrate transactions and generate a representative price.
There are local precedents that show the value of a clear price reference. The livestock investor has historically looked at the Liniers market, and the agricultural investor today can make decisions based on the price of soybeans available on the Rosario Stock Exchange, or future prices on MATBA-ROFEX, all observable with a click. While these markets are not perfectly comparable to gas, both examples illustrate how a visible and accepted price can order an entire sector. In the case of natural gas, where investments are larger and where transportation introduces rigidities and restrictions (due in part to the rates set by the regulatory body), this signaling function is even more necessary.
Logically, for a local price to become a global reference, scale and institutional credibility are required over time. But precisely for this reason, the construction of a robust domestic reference is a prior step to that aspiration. If a large European player is evaluating the possibility of investing in natural gas exploration in Argentina, or if a large Asian consumer is analyzing the possibility of purchasing LNG from Argentina, having a price reference (sale in the first case, and purchase in the second) would be very valuable.
Ultimately, the problem with the gas market in Argentina is not the absence of prices, but fragmentation and the lack of a coordinating price. Consequently, moving towards a hub can be a key piece, at a time when the country seeks to consolidate itself as a relevant actor. In other words, the objective of the industry and the Government’s energy area has to be to generate the conditions so that the price of gas in the Henry Hub of the Pampas appears on the Bloomberg screen of financial operators in New York.
*Guillermo Sabbioni is a Doctor in Economics (University of Florida), Former Director of ENARGAS
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by Guillermo Sabbioni
