Argentina LNG terminal closure risks procurement delay

Argentina's government is warning of dire consequences if the country's sole LNG import terminal is not reopened before the southern hemisphere winter.

Last October a local court ordered the closure of the terminal — located in Escobar, Buenos Aires province — as part of a preliminary injunction prompted by a lawsuit filed by a resident who claimed there was a risk of fire or explosion.

At the time, energy secretariat officials had dismissed the closure, saying it would be lifted imminently. But the shutdown has dragged on, raising concerns that it could delay the launch of LNG procurement tenders for wintertime supply.

Argentina relies on LNG to supplement domestic natural gas production and pipeline imports from Bolivia in the winter months, when demand soars because the fuel is used for heating.

When it is operating normally, the Escobar terminal supplies an average of 18mn m3/d of gas in the winter months, the energy secretariat said in a judicial filing. The terminal is operated by state-controlled YPF.

Without that supplemental gas, Argentina would undoubtedly face residential supply cuts and power outages, the secretariat said in its warning directed at the federal court in Campana, Buenos Aires province. No new hearing is scheduled yet.

The lack of gas would force thermal power plants to use diesel, which not only pollutes more but would cost an additional $600mn.

Argentina forecasts national gas production of around 107mn m3/d in the upcoming winter that starts in May. According to the latest supply contract, it will receive a maximum of 14mn m3/d from Bolivia.

That means Argentina is likely to need an additional 21mn m3/d of gas in May, 42mn m3/d in June, 49mn m3/d in July, 28mn m3/d in August and 9mn m3/d in September, according to secretariat estimates.

The call to reopen Escobar comes amid growing industry talk about the possibility that Argentina may have to recommission another LNG receiving terminal at Bahia Blanca to meet demand.

The Bahia Blanca terminal was closed by the previous government of Mauricio Macri in response to rising domestic gas production, mainly from the Vaca Muerta shale formation.

Argentina's gas production in January-November 2020 fell by 8.5pc from the same time in 2019 to 124.08mn m³/d, according to the latest energy secretariat data.

By Daniel Politi