Despite the higher gas usage, Argentina’s liquefied natural gas (LNG) imports will still be lower than in the last few years due to new infrastructure capacities achieved with the Nestor Kirchner pipeline. Fuel oil and diesel imports for power usage might also help reduce the country’s overall expected LNG demand for the winter.

Argentina’s average seasonal demand

Following the pattern of colder regions like Europe, Argentina experiences an uptick in seasonal winter gas demand, with increased usage between May and August due to household heating demand. Over the past five years, gas usage in Argentina during May has ranged between 101 million cubic meters per day (MMcmd) and 126 MMcmd. However, between 13 May and 26 May this year, the country reported above-average gas consumption almost every day. Demand peaked on 25 May at 141.7 MMcmd, marking the third-highest demand recorded for May over the past decade.

Not by coincidence, 25 May was also the coldest day of the month in Buenos Aires, registering an average of 5 degrees Celsius throughout the daytime. In fact, the time frame where the gas demand peaked matches almost perfectly with the period where temperatures were below average. The city faced temperatures between 4 and 8 degrees Celsius between 9 May and 28 May.

Thermal plants obligated to resort to other fuels

During winter, gas power plants tend to make use of other fossil fuels to help decrease the peak natural gas demand, leaving more gas available for the housing sector. However, this measure was insufficient to sustain the required demand this year.

With investments in Argentina’s infrastructure in recent years, the country has significantly reduced the amounts of other fossil fuels in its power mix, such as fuel, oil, gas oil, and coal. The Nestor Kirchner gas pipeline, commissioned in July last year, raised the country’s transport capacity to 11 MMcmd.

However, due to the higher consumption, thermal plants had to quickly shift to other kinds of fuels. As soon as temperatures started to drop below average, the thermal plants peaked on other fossil fuel usage, directly replacing the natural gas consumption. The shift resulted in a reduction of around 15 MMcmd of gas demand in May.

The quick shift to other fossil fuels was facilitated by the fact that 60% of Argentina’s recently utilized thermal plants can run on both natural gas and other fossil fuels, whereas the rest of them mostly run on natural gas. Based on our recent analysis, 95% of all other fuels indicated in the chart below could be replaced by natural gas if there was enough supply.

Despite sudden high demand, LNG imports were kept on lower historical range

The higher transport capacity provided by the new Nestor Kirchner pipeline allowed for expected LNG imports to be below last year’s numbers. However, the signed volumes were insufficient to meet demand during the challenging month of May.

However, data from June shows that higher-than-average temperatures have since reduced the supply pressure for the country, requiring lower volumes of LNG imports.

With gas usage at its peak, Argentina’s national gas regulator, Enargas, requested that transport and distribution companies cut the interruptible volumes of the market in May. The move was to prioritize gas supply for essential sectors. The crisis was aggravated further by a failure in one of the compressor plants in natural gas distributor Transportadora de Gas del Norte’s Cordoba pipeline, which decreased the pipeline’s movement capacity by 3 MMcmd. As a quick measure to solve the supply imbalance, Argentina’s national power operator Enarsa resorted to buying a surplus load of LNG from Brazilian state-owned oil company Petrobras to circumvent the shortage, inaugurating the partnership between both parties that was signed a month earlier.

The improved infrastructure, thermal plant fuel management, as well as the LNG vessel from Brazil, have helped Argentina avert the crisis that surfaced when the country’s temperatures for the period of peak gas demand (from 8 May to 27 May) were about 17% below average. Even with the large gas reserves present in Argentina’s Vaca Muerta shale formation, Rystad Energy expects the country to require winter LNG imports to guarantee stable gas supplies up to 2026.

Mid-term perspectives for Argentina

However, Argentina’s dependence on imported LNG could be reduced further with the addition of two new compressors to the Nestor Kirshner gas pipeline in the next months, which could raise the pipeline’s gas infrastructure capacity from 11 MMcmd to 22 MMcmd. The second phase of the pipeline is expected to increase this volume up to 40 MMcmd and create a new segment from Salliqueló to San Jeronimo. However, the market is still expecting a private investor to help the project materialize.

While winter demand is still a challenge for Argentina, Rystad Energy expects that further investments in the country’s pipeline infrastructure could greatly help it reduce imports. This would also increase spare capacity during the Southern Hemisphere summer, substantially increasing export opportunities to Chile and the ability to develop a new export market in Brazil.

Authors: 

Vinicius Romano

Vice President, Gas and LNG Markets Research
vinicius.romano@rystadenergy.com

Gabriela Sanches

Analyst, Gas Markets Research
gabriela.sanches@rystadenergy.com

Murilo Romera de Albuquerque

Analyst, Gas Markets Research
murilo.albuquerque@rystadenergy.com

(The data and/or forecasts in this column are Rystad Energy's, and the opinions are of the authors.)