The onset of winter in the USA and Europe is more warmer than expected. For this reason, Northern Hemisphere industries and households require less gas than expected. The price of the product is it collapsed in an unprecedented way and this also created a unique opportunity for Argentina.
Although it is estimated that imports will decrease this year due to the construction of the gas pipeline that will connect Vaca Muerta to Buenos Aires, the country will continue to need foreign gas to get through the winter. In government they figure they will have to buy – at least– 30 ships with LNG (liquid gas) for the cold months.
The purchase of each “cargo” of LNG has been budgeted at approx US$55 per million BTU (the unit of measurement of the sector). Each vessel would cost between $100 million and $110 million, and the total expenditure would exceed $3 billion this year.
But the international price of gas has dropped to levels not seen since 2021. And Enarsa, the state company that deals with the purchase of foreign gas, has pressed the accelerator on a plan that has been working for a few months: the advancement of gas purchases.
The current price per million BTU is $21. That’s less than half of what was paid last winter (between $35 and $45) and nearly two-thirds less than budgeted ($55). At Enarsa they believe it is an operation that could generate savings of up to $2,000 million.
Each LNG tanker, which typically runs between $100 million and $110 million in the winter, could now be bought for $40 million. This would imply a lower spend of between $60 million and $70 million per “charge”. If this number is multiplied by 30, the number of ships Argentina will need, a relief of approximately $2,000 million is at stake.
Enarsa is already probing the main LNG traders, such as Total, Gunvor, Vitol, Trafigura, BP. Wants buy now and take advantage of this exceptional situation.
But traders also have their game. They assume that temperatures could drop again by February. In this way, sales would resume in most of Europe.
Russia was the main supplier of gas to European countries. That business relationship was severed by the Russian invasion of Ukraine. NATO and allied countries have stockpiled gas to weather a harsh winter. They don’t have it, at least for now.
“Right now, they have no one to sell to. But they also don’t want to get rid of all the stock, because Europe may be asking for a lot again in February, and it will be with high prices. It’s hard to estimate what they can do,” says a former negotiator on those contracts, who was linked to the industry, and asked not to be named.
Enarsa, led by Agustín Gerez, has been moving for a month in anticipation of this situation of falling prices. He has already started the polls and is in negotiation. There are no closed purchases yet.
The counterpart is that the pipeline linking Vaca Muerta with Buenos Aires –the cost of which will exceed 300,000 million dollars- You will save less than expected. When LNG cost $36 per million BTUs, the money the government stopped spending to replace foreign gas with domestic gas was close to $3.6 billion. Now, at $21, what won’t be disbursed is close to $2,000 million.
In any case, Domestic gas will be purchased for US$5 once the pipeline is operational. On the outside, it is trading at US$20 in an exceptional price situation. The numbers continue to show an abundant balance in favor of the construction of the work. The true dimension will be in the winter, when the connection works will already be operational. It will be necessary to see the price of imported LNG at that time to determine the savings for 2022. And the pipeline will remain, allowing for new energy planning that contributes to greater gas production.
The changes in the weather surprised everyone. Over the past week, the thermometer in New York has reached 18 degrees, an unprecedented mark that the city has rarely crossed in January. In this way, the demand for gas for heating fell below all forecasts.
The price of gas in the United States it’s about $4 per million BTUs, the same as it was a year agowhen Russia had not yet invaded Ukraine.
The average temperature is also cause for celebration in the main European economies. German heavy industry – which requires a lot of gas – evaluated temporary shutdowns and closures if it did not receive that input, or had to pay dearly for it. It was because the government preferred to prioritize residential gas demand in the face of cold weather. The milder winter is allowing gas for everyone: homes and industries.
Source: Clarin
