Argentina, key LNG buyer, faces gas surplus due to warm winter

An unusually warm winter in the southern hemisphere threatens to leave Argentina with an excess of liquefied natural gas.

Argentina will allocate some US$1.8 billion to import 44 LNG shipments this year, 20 of which have already been delivered and the rest are expected to arrive in the coming months. With the mild climate, some of these supplies may not be needed as households keep their heat turned off.

LNG traders closely watch imports from Argentina because it is a key buyer in the volatile spot market, and the country’s bondholders watch its energy trade because it affects the country’s precarious foreign exchange reserves.

After last year’s mild winter, the state-owned company Argentine Energy reported that it was able to sell three of its surplus cargoes to other countries and make a profit from the transactions.

But this year, Argentina agreed to pay about $20 per million British thermal units, and weakening demand in Europe has driven prices down ever since. This leaves Argentina with few opportunities to transfer the cargoes, and suppliers unwilling to renegotiate contracts to lower fuel prices, traders familiar with the matter said.

Argentine Energy it could delay the arrival of a shipment or two, according to one person. The suppliers in Argentina this year are BP PLC, TotalEnergies SEShell Plc, Vitol SA, Gunvor Group Ltd. and Glencore Plc.

A spokesperson for Argentine Energy declined to comment. Representatives of the country’s energy ministry did not respond to a request for comment.

new pipeline

The new pipeline of the formation of shale de Vaca Muerta was completed on time and in about a month it will begin to increase domestic production by 11 million cubic meters per day, approximately 8% of last winter’s production, thus reducing the need to import LNG.

The pipeline will allow huge foreign exchange savings because “the country will not need large-scale imports”, said last week the Secretary of Energy, Flavia Royon.