Argentina struggles to import gas before winter

Despite having one of the largest gas reserves in the world, Argentina is preparing itself for unfathomable fuel restrictions as it struggles to import gas.

Although its shale gas deposits are comparable to those in the Appalachia region, which have made the US a major exporter, Argentina has invested little in production for years and does not even meet domestic demand.

Now, the country competes for liquefied natural gas (LNG) cargoes with industrial behemoths such as the United Kingdom and Japan. Given the recent price increase, the timing couldn’t be worse. Moreover, Russia’s invasion of Ukraine has created havoc on energy and commodity markets, increasing shortages, supply chain bottlenecks, and price swings that have shaken the global economy since the outbreak began.

Argentina is currently trying to import gas for May and June to prepare for the upcoming winter. However, with the recent price increase, Argentina may not be able to afford all of the LNG necessary to meet national needs.

“Argentina was initially planning to order 60 to 65 LNG shipments, but these price force adjustments to the original strategy,” Marcos Bulgheroni, CEO of Pan American Energy, one of the country’s largest gas businesses, said during a conference held last week in Buenos Aires.

According to anonymous government and gas processing sector representatives, the country is on the verge of having to restrict energy supplies to industrial consumers.

“It’s going to be a tough winter in terms of fuel supplies because of Argentina’s diminished access to strong currencies like the dollar,” said Agustín Gerez, commander of state-owned energy company Ieasa, which organizes the country’s LNG tenders. He hopes that the winter will be mild and contain the demand.

The problem has been brewing for a long time. The chronically bad business environment did not attract enough investment to the Vaca Muerta shale deposit, thus delaying the construction of the pipelines needed to bring gas from Patagonia to industrial hubs and urban centers. As a result, instead of becoming a shale power, Argentina has become a significant importer of LNG. These imports take place mainly in the global spot market, which is quite volatile. The US and Qatar are the leading suppliers of the product, according to data compiled by Bloomberg.

To make things even worse, negotiations to bring in more gas from neighboring Bolivia have stalled. Argentina competes for supplies with Brazil, which takes most of the available fuel.

Argentina currently imports 7.5 million cubic meters a day from Bolivia. However, it will need approximately double this volume to endure a cold winter between May and September. It’s unclear whether Argentina can secure a deal of this size while Bolivia’s supplies are dwindling, said Álvaro Rios, who was once Bolivia’s oil and gas minister and now runs consultancy Gas Energy Latin America. Bolivian production has fallen by 17% in the last four years as investments in the sector retreated after the nationalization of gas fields.

Source: Valor Econômico

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https://valor.globo.com/mundo/noticia/2022/03/28/argentina-vive-pesadelo-para-importar-gas-antes-do-inverno.ghtml

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