Argentina to scrap LNG imports by 2021-22

19 July 2016, Week 28, Issue 622

Argentina is aiming to eliminate imports of LNG as soon as 2021 or 2022 by boosting domestic gas production to replace them.

“It’s going to take five to six years for us to stop importing gas by tanker,” Argentine President Mauricio Macri said last week.

To achieve this, his government will promote domestic upstream activities to rebuild production from a ten-year slump in 2014, including through the development of huge resources in tight and shale plays discovered in 2010.

The incipient development of plays like Vaca Muerta has already helped production to recover. National output rose 6.6% to an average of 121.2 million cubic metres per day in the first four months of 2016 from a ten-year low of 113.7 mcm per day in 2014, said the Argentine Oil and Gas Institute, an industry group.

The country’s state-run energy company YPF has been leading the push, working in partnership with Chevron, Dow Chemical and Petrolera Pampa.

Even so, the country has had to continue importing LNG in addition to gas supplies by pipeline from Bolivia, plus from this year regasified supplies from LNG terminals in Chile. There are plans to import regasified supplies from Uruguay starting in 2017.

The imports are currently meeting a third of the country’s gas demand, Energy Minister Juan Jose Aranguren said last week.

A main reason for betting on local production is that LNG imports are more expensive, Aranguren and Macri said.

Argentina is paying an average of US$6.5 per million Btu for a planned 90 cargoes this year, which is equivalent to 25 mcm per day in send-out capacity, and US$7 per million Btu for 5 mcm per day from Chile. That is more than the average wellhead price of US$5.20 per million Btu in Argentina, and also more than the US$3 per million Btu the country pays for imports of 15-20 mcm per day for gas from Bolivia.

By eliminating LNG imports, the country will also save on the US$100,000 per day it pays in rent for each of the two floating regasification terminals, one docked in Bahia Blanca and the other in Escobar.

Another prong of the plan to scrap LNG imports is to promote energy efficiency and conservation.

Macri has called on the population of 43 million to be more careful with how much energy they consume. “We must help by being more frugal,” he said.

Aranguren said imports of Bolivian gas would continue even after the phasing-out of LNG because of their lower cost and availability. Bolivia produces a surplus and without an export market it would have to cut production.

Edited by

Ryan Stevenson

Managing Editor

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