Argentina’s entrance into the LNG export business will bring increased competition for US Gulf Coast LNG exporters, says John Snyder
Argentina would eventually like to export LNG to some 40 countries. Its presence on the world LNG export stage could well come at the expense of US LNG exporters, says John Snyder
In addition to its own supply, Argentina currently still imports LNG and uses gas piped in from neighbouring countries to meet the country’s energy needs. However, according to the GIIGNL, the 2.6M tonnes of LNG Argentina imported last year equated to more than a 20% drop from 2017’s volumes.
Most significantly, in June, Argentina became the 21st country to export LNG, signalling the imminent demise of its LNG imports. And, as if to alleviate any second guessing as to its intent, Argentina has already closed one of its two regasification terminals.
Much as it did in the US, the emergence of shale gas production is dramatically changing the energy picture in Argentina.
Argentina’s emergence as an LNG exporter comes as investment in gas production ramps up in its Vaca Muerta field. One of the largest unconventional gas resources in the world, Vaca Muerta’s potential is such that it has attracted investments from major players including ExxonMobil and Qatar Petroleum.
As a further strategic step, Argentina is combining its rising domestic gas production with a more flexible pipeline supply from neighbouring Bolivia and expects to be able to halt all LNG imports by 2020.
In February, Argentina’s Secretary of Energy Gustavo Lopetegui and the Bolviaian Minister of Hydrocarbons Luis Alberto Sanchez signed a memorandum of understanding that would allow Bolvia’s state-run YPFB to sell its natural gas directly to consumers in Argentina.
Perhaps more importantly, in addition to supplying Argentina, Bolivia wants to export its own natural gas as LNG through Argentinian terminals and intends, through the deal to invest in Argentina’s LNG export projects.
So what practical moves will Argentina need to make to successfully pivot from its previous life as an importer to its new life as a major LNG exporter?
In fact, the country has already taken its first step in that direction with Tango FLNG, the newly commissioned Exmar-owned floating liquefaction vessel moored off of Bahia Blanco.
Operated under a 10-year agreement between state-run YPF and Exmar, and with expected sales initially of about US$200M, Tango FLNG has a liquefaction capacity of 500,000 tonnes per year and produced the country’s first LNG export cargo.
Ironically, however, Argentina’s first 30,000 m3 cargo of super-chilled natural gas from Tango FLNG, was reportedly purchased by Cheniere Energy, the biggest exporter of LNG in the US.
The irony of the transaction lies in the fact that Argentina is set to emerge as a potential rival to US exports to Asia. Cheniere exported 19.4M ft3 of LNG to Argentina from its Sabine Pass, Louisiana facility in 2018, so Argentina has some ground to make up, but there are a few factors working in Argentina’s favour.
Argentina’s peak LNG production in the summer months coincides with strong winter demand from utilities in Asia. This seasonal dynamic could attract Asian buyers and present a strong economic case for LNG from Argentina.
Energy research firm Wood Mackenzie points out that Argentina will have lower LNG transportation costs to Asian markets than US Gulf Coast export terminals. Its geographic position on South America’s Pacific coast allows LNG transports to avoid toll fees and congestion at the Panama Canal.
In terms of Argentina’s ability to ramp up LNG production, Wood Mac expects major LNG production volumes in the Latin American country to reach 6 mta by 2024 and climb quickly to 10 mta by 2030.
And the Vaca Muerta field does not comprise the full extent of Argentina’s gas reserves. There are also other sources of natural gas emerging. Working with international energy majors Equinor, Total, ExxonMobil, QP, Tullow Oil, Wintershall, Eni, BP, Shell and Mitsui, Argentina is exploring blocks offshore in the North and Malvinas basins.
Ultimately, there is little question that Argentina is clear and directed in its global export ambitions. As YPF executive vice president Marcos Browne said quite simply in a post on social media, YPF intends to use Tango FLNG to export to gas markets around the world.
It’s the first step, but it won’t be the last.