Argentina's federal government in July changed LPG regulations to reduce state intervention and facilitate private sector operations by liberalizing prices along the production chain. The president of Argentina's chamber of liquid petroleum gas companies Pedro Cascales talked with Argus on the sidelines of the Liquid Gas Week conference in Rio de Janeiro about how this has changed the market. Edited highlights follow.
How has the recent change in Argentina's LPG law affected prices?
That change caused real LPG prices to drop compared with inflation. Prices rose nominally, but when adjusted for inflation, they fell by around 20pc.
Previously, with a maximum price that was almost uniform across the country — with no more than a 5-7pc difference [in prices] between the most remote areas and those closest to the production zone — it was a price that did not account for logistical costs.
By removing that maximum price, there was a surge in price competition. So the effect for consumers was positive. For companies, it created a competitive and tense environment where they have to start generating efficiencies and other mechanisms to achieve greater profitability.
Can the law change hinder smaller companies, making them lose market share?
So far, smaller companies have not lost market share.
Argentina has approximately 24 LPG companies. Four of them hold 80pc of the [distribution] market, and the remaining 20pc is shared among the other 20 companies, including cooperative enterprises, a model that does not exist in Brazil, for example.
Are you still expecting other adjustments to laws or regulations?
I believe the government should place strong emphasis not only requiring that the LPG canisters are safe to use but also on monitoring it, and ensuring that new entrants can enter freely, but with an associated investment in cylinders.
Because if they do not invest, they will probably use other companies' cylinders or expired ones. And that is a risk that would be unacceptable for the industry.
How will supply from Vaca Muerta affect Argentina's LPG market?
If stable rules and a stable playing field can be maintained, and politics do not interfere in a way that affects investments, I believe the future [for Vaca Muerta] is almost limitless.
Argentina's LPG exports could double in the next 3-4 years, or even less. That will create a lot of new regional dynamics. But I also believe it will benefit Argentina itself, with new applications and new uses for domestic consumption. Specifically for LPG, I see a possible increase in its use for vehicles, which is currently almost nonexistent. There could also be new uses, such as generating power from natural gas or LPG to power data centers for artificial intelligence or cryptocurrencies.
Argentina exports LPG to Latin America, especially to Brazil. Do you think that with Vaca Muerta, Argentina will start looking at other export markets?
That's bound to happen, because there will be a surplus of product. What we will need is logistics.
We will need to develop the midstream market, which is currently underdeveloped, both in pipelines and other more efficient transport methods.
Today, almost all LPG from Argentina is transported by trucks. In Brazil, it is transported by small ships, because we do not yet have the development of private terminals for large ships. But I also envision exports to Chile, Peru, Ecuador and especially Colombia, by ship.
Argentina will need an outlet for LPG — and probably LNG as well — towards the Pacific soon, because Colombia has a structural deficit and would be a perfect ally. It is a very close route, going through the Pacific to the Pacific coast.
How much room is there for household growth in LPG consumption in Argentina, compared with natural gas?
Domestic growth does not have much room. Unlike most Latin American countries, where wood can be replaced by LPG, there is almost no wood to replace in Argentina, because wood is more expensive than LPG.
Also, Argentina's urbanization rate is of 92pc, with 33pc of the population living in Buenos Aires and its surroundings. We have a lot of rural areas, but with few inhabitants. And LPG is ideal where there's not enough population density to justify a gas pipeline.
That means residential LPG has limited growth potential. So growth in demand needs to come from other sectors.
