OREANDA-NEWS. The main pipeline the once carried Argentinian natural gas across the Andes mountains to Chile is about to debut in reverse, testifying to the southern cone?s shifting resource landscape and the expanding role of imported LNG.

"We?ve been preparing for this for years," Ra?l Montalva D?az, chief executive of the GasAndes pipeline company, told Argus in an interview yesterday. "There are many future possibilities for a bi-directional system. Our model is the UK Interconnector," which integrates the northern European gas market.

Under a short-term agreement that is expected to be signed next month, Chile?s state-owned oil company Enap and fellow offtakers at the Quintero LNG terminal will deliver around 4mn m?/d of gas through GasAndes to Argentina?s state-owned energy company Enarsa during the peak-demand winter months of June to September.

Additional supply of around 1.5mn m?/d is expected to reach Argentina through Chile?s northern Mejillones LNG terminal and corresponding Norandino cross-border pipeline.

The LNG-derived supply will alleviate Argentina?s chronic wintertime supply deficit that its own domestic production and two LNG import terminals lack the capacity to fill. The Chilean supply will also complement Argentina?s pipeline supply from Bolivia, where gas reserves have stagnated. GasAndes connects to TGN?s west-central pipeline that supplies Buenos Aires.

For Chile, the deal offers an opportunity to better monetize midstream assets that were nearly orphaned by Argentina?s 2004 decision to prioritize its domestic gas market over exports. And it gives Chile?s LNG offtakers, especially Enap, an alternative outlet for excess supply purchased under long-term LNG contracts, topped up with spot cargoes if needed.

More broadly, the imminent cross-border gas deal boosts commercial ties between Argentina and Chile after years of distrust, and forges a path toward lasting energy integration.

Market participants say the Chilean supply, equivalent to around six cargoes of LNG, is expected to be sold to Argentina at a fixed price of around $7.70/mmBtu at the border for the central supply, potentially higher in the north, including the delivered cost of LNG, regasification and transport.

For Montalva the commercial terms of the gas sales agreement are irrelevant, as GasAndes will only participate in a midstream role under an interruptible contract based on transported volume. But from his long perspective in the business, he sees deeper commercial potential for both sides.

A long-discussed gas swap that would allow Chile to import Argentinian gas through the GasPacifico pipeline in the center-south offers another opportunity once regulatory and customs hurdles are crossed, he says. Further down the road, Uruguay might also be integrated, and Argentinian shale gas could rejigger flow patterns yet again.

The historic breakthrough followed the December 2015 inauguration of Argentina?s reform-minded new president Mauricio Macri, but technical preparations have been underway since at least 2011, when GasAndes last transported Argentinian gas to Chile.

That year, GasAndes conducted engineering studies for a reversal, signaling a modest cost of $5mn-$6mn for work on the Argentinian side, which features compression stations at Papagayos and the terminus at La Mora in Mendoza province. Purchasing of equipment for the reversal, mainly valves, started last year. The main 463km GasAndes line currently has 10.5mn m?/d of capacity when it flows from Argentina to Chile, 4mn m?/d in reverse.

The procurement process was a challenge in light of Argentina?s import restrictions, but the job got done, Montalva says.

GasAndes, built in 1997 for an initial $325mn in the heyday of Argentina?s short-lived gas boom, remained active even after Argentinian supply dried up. "We never stopped operating," he says.

On the Chilean side, the line was partially reversed in 2008, with compression at San Bernardo and line pack utilized to ensure regional gas distribution and thermoelectric feedstock.

But some foreign investors lost interest over the years. GasAndes was controlled by TransCanada until 2001, and by Total until 2014. Now the midstream company is jointly controlled by Argentina?s CGC, part of influential Corporaci?n America, and Metrogas, which is controlled by Spain?s Gas Natural Fenosa, with 41.5pc apiece. AES Gener, the Chilean subsidiary of US utility AES, holds the remaining 17pc.