Argentina backs out LNG as demand wanes

OREANDA-NEWS. September 05, 2016. Argentina canceled or reprogrammed four LNG cargoes scheduled to arrive this month as higher-than-expected temperatures and shrinking economic activity have eroded demand.

Three LNG cargoes that had been scheduled for September were reprogrammed for next year while one was canceled, Argentina's state-owned energy company Enarsa said.

"Due to the high temperatures in August, there was no need for as much gas in the system," an Enarsa spokesperson said. "There is no space to store the LNG."

All the affected cargoes were meant for the Bahia Blanca terminal, which is the larger of the two LNG receiving terminals in Buenos Aires province.

Argentina is now scheduled to receive 12 LNG cargoes in both of its terminals this month, an Enarsa official said.

Enarsa is the sole LNG importer in Argentina and carries out all purchases on a spot basis through state-controlled YPF.

The confirmation that LNG purchases have been postponed and canceled came a day after Argentina's president Mauricio Macri met with Qatar emir Tamim bin Hamad Al Thani.

"We will continue moving forward with talks on energy issues, agricultural products and the development of different projects," Argentina's strategic affairs secretary Fulvio Pompeo said.

Qatar has emerged in recent years as one of Argentina's top LNG suppliers.

Argentina's industrial activity declined by 7.9pc in July, on the year, according to data released this week by the government's Indec statistics agency. It marked the steepest drop in 14 years and the sixth consecutive monthly decline.

Indec also reported last month that economic activity had dropped 4.3pc in June, on the year. Cabinet chief Marcos Pe?a has said the government expects Argentina's economy to contract 1pc this year.

Argentina, once a reliable gas exporter for the region, now imports LNG and piped gas from Bolivia as well as regasified gas from neighboring Chile.

Argentina paid an average of \\$4.77/mn Btu for the five LNG cargoes it was scheduled to receive last month at Bahia Blanca, below the country's subsidized wellhead gas price.

The LNG prices ranged from \\$4.61/mn Btu to \\$5.07/mn Btu, slightly lower than the average price of \\$4.88/mn Btu it paid for six cargoes in July, according to Enarsa.

At the Escobar terminal, the average price of the eight cargoes it was scheduled to receive last month was \\$5.58/mn Btu, slightly above the average \\$5.56/mn Btu the country paid for the eight cargoes it received in July.

Deliveries to Escobar are more expensive because of logistical challenges associated with its location on a narrow Parana river channel that is only suitable for small or partial cargoes.

Through August, Bahia Blanca received 24 LNG cargoes at an average price of \\$5.02/mn Btu while Escobar received 41 with an average price of \\$5.41/mn Btu, according to Enarsa.