Gas imports: What’s the 2022 outlook for Argentina?

The size of Argentina’s 2022 winter energy bill will depend on how domestic and international factors conspire.

The country usually imports costly liquified natural gas (LNG) for the colder months to help cover local demand, which is also partially met by year-round purchases of natural gas from neighbor Bolivia. 

In population hub Buenos Aires, average temperatures are lowest in June, July and August. 

Argentina’s 2021 commercial energy deficit is expected to register at around US$1.60bn. A drought impacting hydroelectric output and placing greater demand on gas and liquid fuels for thermoelectric plants has played a role.

PRODUCTION

Local gas production has also taken time to bounce back after plunging amid the pandemic shock of 2020.

Shale gas producers in the Neuquina basin have driven growth, with winter output averaging 88-89Mm3/d (million cubic meters per day), nudging close to the record of 91-92Mm3/d set in winter 2019.

To ramp up national production – which averaged 133Mm3/d in September – and help substitute imports through 2024, the government has launched a third round of its Plan Gas incentives program. Officials seek up to 5.5Mm3/d from producers in three of the country’s five gas basins: Neuquina, Austral and Northwest. 

While gas dispatch capacity at Neuquina basin shale play Vaca Muerta is almost saturated, production from the hydrocarbons golden goose could still be ramped up, BNamericas was told. 

“There’s still a margin of 3-4Mm3/d to transport gas from Neuquén to demand hubs with the system as it currently stands,” said Luciano Codeseira, director of consultancy Gas Energy Latin America for Argentina and CEO of research advisory firm Ceibo Growth Strategies.

He added that if 1-2Mm3/d in output is secured from the south, home to the Austral basin, a decline in production from this part of the country – stemming from dampened exploration and production investment – could be offset. 

According to federal gas regulator Enargas, Argentine gas imports this year spiked at 53.4Mm3/d on July 18. Bolivian imports accounted for 18.2Mm3/d, the Bahía Blanca LNG import terminal 15.6Mm3/d, and the Escobar LNG import terminal 19.6Mm3/d.

Gas imports averaged 23.46Mm3/d last year, up from 18.7Mm3/d in 2019.

Codeseira said better hydrological conditions next year would reduce pressure on thermoelectric plants, potentially freeing up 4-5Mm3/d gas and/or avoiding the need to burn around 200,000t of fuel oil and 100,000m3 of diesel. 

LNG

In terms of LNG, prices on the international markets have rocketed, benefiting global exporters. Argentine producers operating under the Plan Gas scheme sell at fixed – but currently lower – prices: around US$3.60/MMBTU (million British thermal units) compared with spot market highs of over US$50/MMBTU seen in Asia recently.

Codeseira is cautiously optimistic the external scenario will improve for Argentina.

“Regarding prices, I also don’t imagine them being the same as, or higher than, they are today,” Codeseira said. “Obviously, many of the LNG shipments that arrived had been auctioned prior to the crisis of high prices, but I don’t think they [high prices] will last until our winter of 2022.”

To spur sector growth the government wants to build, under the public works model, a major pipeline between Vaca Muerta and the Buenos Aires area. Officials have assigned budget funds and engaged in talks with potential Chinese backers. 

OUTLOOK

Daniel Gerold, founder and director of advisors G&G Energy Consultants, said there was a risk that Argentina will face a much bigger energy deficit next year, estimating that the deficit could hit US$4.5bn because of higher imports. 

Gerold said Neuquén, because of transport restrictions, could not offset falling output from other basins and an expected drop in imports from neighbor Bolivia, whose own production is declining. He also cited the rise in international gas prices.

To buy gas, Argentina needs to tap its already strained foreign reserves. 

“It’s a serious situation, also because imports are focused on the winter months,” Gerold said during a webinar hosted by local hydrocarbons chamber IAPG.

“This winter, US$800mn [worth] was imported every month and the chairman of the central bank is very concerned about this, because they expected it was going to be less. I think this could easily double in the coming year.” 

Codeseira holds a more optimistic outlook, which is based on the assumption that 2022 sees average temperatures, the government strikes a deal with the IMF over its debt obligations, a degree of political stability is achieved and round 3 of Plan Gas advances.