Argentina Reworks LNG Import Deals

 

South America's biggest LNG importer 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 continued to outpace demand.

 

But a milder streak in August has undercut demand for heating fuel and left state-run LNG importer Enarsa juggling a supply overhang, according to trading sources.

 

Enarsa and Argentina's energy ministry declined to comment.

 

Stubbornly high stock levels at Argentina's two import terminals, Bahia Blanca and Escobar, also mean there are physical restrictions on any further imports.

 

LNG trade sources who conduct business with Argentina say at least four cargoes destined for Bahia Blanca have been canceled or rescheduled so far due to the downturn in demand.

 

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

 

Argentina's LNG suppliers, which include major oil firms and leading trading houses, such as BP, Gunvor and Royal Dutch Shell, can levy penalty fees of up to $5 million for cancellations, one trading source said.

 

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

 

Seven gas tankers are now crowded around Argentina's import terminals, live ship-tracking data shows, illustrating the scale of the difficulties facing suppliers.

 

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 to other Latin American countries.

 

"LNG imports into Latin America in the first half of the year are down by three 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, sea-borne LNG imports declined by 15 percent in the same period.


(By Oleg Vukmanovic and Hugh Bronstein; Additional reporting by Juliana Castilla and Eliana Raszewki; editing by David Clarke)