Argentinian government announces US$570 million rail PPP

Argentinian government announces US$570 million rail PPP

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The Government of Argentina has announced that a 700km section of the North Patagonia (Norpatagónico) railway will be upgraded through a public-private partnership (PPP). The estimated total investment required is US$570 million.

The railway connects the port area of ​​Bahía Blanca, located in the province of Buenos Aires, to Añelo, in the province of Neuquén, also passing through La Pampa and Río Negro provinces. It will serve as a gateway to Vaca Muerta, a 7.5 million acre shale field, which spans Neuquén, Mendoza, Río Negro and La Pampa. 

The scope of the project is mainly improvement and renovation of existing railways, though it includes the construction of 83km of completely new railroad between Cormmiral Cordero, in Río Negro, and Añelo.

The successful bidder will also invest US$26.7 million in improving road access to Bahía Blanca. Sections of five national routes 3, 33, 229 and 252 (highways - four-lane) and 22 (safe route - two-lane road with third alternating lane) which span a total 220km will be upgraded.

The construction works have an estimated term of four years, with the launching of the tender scheduled for the fourth quarter of this year. 

The reactivation of the Norpatagónico railway is projected to increase the amount of cargo transported by train to Vaca Muerta sixfold, from the current 700,000 tons per year to 4.1 million tons in 2030. Goods to be transported include sand, pipes, fruits, construction materials, methanol and animal feed.

The upgrades are expected to reduce transport costs by 50% and also increase the speed of the trains, which in some sections now reach only 12 km/h, to up to 90 km/h. This will reduce the number of trains per route, improving traffic and reducing pollution.

With total proven reserves of around 927 million barrels, the second-largest shale field in the world, Vaca Muerta is seen as fundamental for the future of Argentina's energy sector. This project is crucial to the development of the area, whose reserves are not currently being comprehensively exploited. Investment is likely to ramp up in the near future though, as President Mauricio Macri announced a development plan for Vaca Muerta in late 2017. Several companies have committed to invest a combined total of US$5 billion in the field.

Thus, through its connection to Vaca Muerta, the project will increase investment in Argentinian oil and stimulate regional economic growth. It will also improve job prospects for Argentinians, with 10,000 jobs expected to be created through the railway upgrades.

The project is part of the government's efforts to reactivate the country's freight rail systems. The Ministry of Transport-led scheme anticipates US$9 billion investment in 9,850km of railway. Alongside a new operating system for freight trains recently launched by the government, the rehabilitation of the railways is projected to increase their load potential fivefold by 2031.

In 2015, freight trains in Argentina transported 18.4 million tons, one of the lowest annual amounts ever recorded. Over the next few years planned upgrades and investments are projected to increase the capacity of the system to 97.9 million. This will not only increase the number of goods transported, but also the variety of products transported, benefiting many industries and the economy in general.

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