As Local Demand Slows, Argentina Reworks LNG Import Deals

Argentina is diverting or cancelling incoming shipments of liquefied natural gas (LNG) after mild late winter temperatures curbed fuel demand and forced state-run buyer Enarsa to rework some deals.

South America's biggest LNG importer had launched back-to-back tenders in June and July after a cold start to winter, lining up dozens of cargoes at bargain prices as global output outpaced demand.

But a milder streak in August undercut demand for heating fuel and left Enarsa juggling a supply overhang, the company and trading sources said.

Enarsa said it had cancelled one shipment and delayed three cargoes until next year because of one of the warmest Augusts in a decade.

Stubbornly high stock levels at Argentina's two import terminals, Bahia Blanca and Escobar, also mean there is no storage for more imports.

LNG trade sources who conduct business with Argentina say at least four cargoes destined for Bahia Blanca have been cancelled or rescheduled.

"The Bahia cargoes are being targeted for cancellation because it is more difficult to divert Escobar shipments," one source said.

STOP FEE
Argentina's LNG suppliers, which include the likes of BP, Gunvor and Royal Dutch Shell, can levy penalty fees of up to $5 million for cancellations, one trading source said.

Fernando Pazos, head of institutional relations and communications for Enarsa, denied the firm had to pay penalties but said Enarsa sometimes pays a stop fee when a ship is outside the port but cannot enter due to weather conditions.

LNG traders dealing with Argentina demand payment upfront due to concerns about the level of dollar reserves in the country after they were run down by the former president.

Seven gas tankers are crowded around Argentina's import terminals, live ship-tracking data shows.

One of the Bahia Blanca-bound tankers already diverted, the Methane Alison Victoria chartered by Shell, discharged at Jordan's port of Aqaba on Wednesday, according to Thomson Reuters shipping data.

Problems in the take-up of LNG stretch beyond Argentina.

"LNG imports into Latin America in the first half of the year are down by 3 million tonnes, or 28 percent lower than volumes received over the same period last year," independent LNG consultant Andy Flower said.

In Mexico, cheaper pipeline imports from the United States pushed out LNG, while Brazil cut imports by 60 percent as heavy rainfall replenished hydroelectric reserves, he said.

In Argentina, seaborne LNG imports declined by 15 percent in the same period.