10-06-2016

Argentina’s energy needs draw fuel tankers from around the globe

tanker

A flotilla of 21 fuel tankers from Europe, the Caribbean, Brazil and the United States is steaming toward Argentina as it ramps up imports of gasoil and liquefied natural gas to record levels this year, according to its new government and Thomson Reuters data.

Still a long way from regaining the energy self-sufficiency lost in 2010, the South American country has bought 49 cargoes of LNG so far this year and will buy 90 in all, a spokesman for the Energy Ministry told Reuters this week.

According to the results of tenders seen by Reuters, major oil companies are competing for a lucrative slice of market share during a years-long “transition” period that will last until Argentina boosts its oil and gas output significantly by developing vast new shale reserves in the Vaca Muerta formation.

“Investment in exploration has resumed, but it will take a while to see results,” said energy consultant Roberto Brandt. “Argentina will be a net gas importer at least during the coming 10 years.”

Argentina tried to limit costly LNG purchases to about 25 cargoes a year since it inaugurated its second regasification plant in 2010, only to end up purchasing more than planned to meet growing shortfalls.

The new, market-oriented government of President Mauricio Macri has said gas imports will rise by some 13 percent this year. It is working to avoid power cuts caused by higher-than- expected demand in a cold South American winter, stagnant domestic gas output and limited supplies from Bolivia.

The energy ministry announced on Wednesday that gas supply to factories in Argentina will be cut for the second time in less than two weeks to ensure enough flow for households.

On top of LNG purchases, the country’s power regulator, Cammesa, has bought 22 medium-sized cargoes of gasoil this year. Brazil, which in April sent its largest diesel cargo ever to Argentina, has had less gasoil to send, while economic woes in Venezuela have slashed its gasoil exports.

The LNG imports add to gas purchases from Argentina’s traditional supplier, Bolivia, and from Chile. A net importer, Chile started selling its LNG surplus to Argentina in December and plans to continue to do so until year’s end, said a source from state-run ENAP.

Macri is trying to attract foreign capital to the oil industry to boost output after a decade of low investment and the nationalization of producer YPF.

“Argentina is a net energy importer with significant deficits,” said the country’s energy planning secretary, Daniel Redondo. “There’s not a way we can reverse it right now.”

Argentina’s oil and gas output fell 12 percent over the last five years, to 532,000 barrels per day and 117 million cubic meters per day in 2015, according to its Petroleum and Gas Institute.

Last year’s energy trade deficit totaled $6.5 billion, according to official figures. But higher import volumes this year may be partly offset by lower global prices, Brandt said.

Importers are paying $5-$5.20 per million BTU for LNG in tankers, according to the Energy Ministry. The most expensive imports are coming by pipeline from Chile for around $7 per million BTU.

Oil firms awarded with tenders this year to supply LNG include: Gazprom, Trafigura, Petrobras, Gas Natural SDG, BP, Koch Industries, Vitol, Royal Dutch Shell and Statoil.

In three tenders launched this year by YPF on behalf of Cammesa, Argentina has also awarded offers to Shell, Gunvor, Vitol, Glencore, Trafigura, Lukoil and Cargill to import some 6.6 million barrels of gasoil.

Of the LNG and refined products cargoes sailing to Argentina for June delivery, 38 percent were loaded in Europe and 19 percent in the United States, according to Thomson Reuters data.

Some of the tenders were filled with inventories from U.S. Gulf Coast and East Coast refiners, traders focused on diesel sales said.

Source: Reuters

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