Just as the high international gas price was a martyrdom for the Central Bank’s dollar reserves in 2022, there is now a chance that Argentina will make a strong savings due to the drop in the price of this product.
Argentina needs imported gas between May and August when the temperature drops. local production not enough to meet demand and the country buys liquid gas (LNG) and fluids from Bolivia.
The state company Enarsa will launch a tender for the acquisition of these gas carriers on Monday. It is estimated that he will try to shop around 30 shipments of LNG.
The purchase of each “cargo” of LNG has been budgeted at approx US$55 per million BTU. A ship would cost between 100 million and 110 million dollars and, in this sense, the total expenditure would exceed 3,000 million dollars for this year.
But the price of gas has come down. Winter is milder than expected for Europe and other countries that need imported gas. The price is approximately US$21 per million BTU.
Enarsa sees an opportunity in that situation. She intends to anticipate the purchase planned for the winter. From Monday yeswill request offers from merchants of this product. If you can acquire 30 vessels at $21 per million BTUs (a 62% drop from the original amount), you could end up paying about $1.2 billion.
This would represent a saving of US$ 1,800 million compared to what was agreed. In his latest statements, Economy Minister Sergio Masa extended this potential benefit to $2.4 billion.
During 2022, Argentina has allocated USD 2,700 for LNG imports. It paid an average of $29 per million BTUs, the industry standard. It was the highest price paid for that product. In 2021, it had paid $1.1 billion for that gas.
Although it is estimated that imports will decrease this year due to the construction of the gas pipeline that will connect Vaca Muerta with Buenos Aires, the country you’ll still need foreign gas to make it through the winter.
The start of winter in Europe is warmer than expected. For this reason, Northern Hemisphere industries and households require less gas than expected. The price of the product has plummeted unprecedentedly.
Each LNG tanker, which is typically between $100 million and $110 million in the winter, now could be reached in US$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.
Traders too they have their own game. At the beginning of the year they didn’t want to give up on their product and preferred to keep it, according to sources close to these negotiations. But now they see that the European Union has replenished its reserves and would only begin to replenish them from April.
Sellers estimated that temperatures could drop again by February and that sales would resume in most of Europe. But they also believed that the continent’s largest economies – Germany, France, Italy, Spain – would already be in turmoil from high heating prices. So far that hasn’t happened and all eurozone growth forecasts have improved.
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.
Enarsa, led by Agustín Gerez, has been moving for a month in anticipation of this situation of falling prices and will advance with offers from Monday.
The gas pipeline that will connect Vaca Muerta to Buenos Aires, on the other hand, the cost of which will exceed 300,000 million dollars, 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. Outside, it is mentioned four times more. The numbers continue to show abundant balance. The real dimension of the savings can be seen in the winter period, when the connection works are already in operation. It will be necessary to see the price of LNG imported at that time to determine the savings for this 2023.
The average temperature is also cause for celebration in the main European economies. German heavy industry, which requires a lot of gas, was considering disruptions and temporary closures if it didn’t get 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 to be available for everyone: homes and industrial activities.
Source: Clarin
