Mild weather, lower demand impels Argentina to rework LNG import deals
(Reuters)—Argentina is diverting or cancelling incoming shipments of liquefied natural gas (LNG) after mild late winter temperatures curbed fuel demand and forced state-run LNG buyer and importer Enarsa to rework some deals.
South America's biggest LNG importer launched back-to-back tenders in June and July after a cold start to winter, lining up dozens of cargoes at bargain prices as global output continued to outpace demand.
However, a milder streak in August has undercut demand for heating fuel and left Enarsa juggling a supply overhang.
Stubbornly high stock levels at Argentina's two import terminals, Bahia Blanca and Escobar, also mean there are physical restrictions on any further imports.
Reports indicate that at least four cargoes destined for Bahia Blanca have been canceled or rescheduled due to the downturn in demand.
Argentina's LNG suppliers, which include major oil firms and leading trading houses such as BP, Gunvor and Royal Dutch Shell, can levy penalty fees of up to $5 MM for cancellations.
Seven gas tankers are now crowded around Argentina's import terminals, live ship-tracking data shows, illustrating the scale of the difficulties facing suppliers.
One of the Bahia Blanca-bound tankers, the Methane Alison Victoria chartered by Shell, has already diverted and discharged at Jordan's port of Aqaba, according to Thomson Reuters shipping data.
Problems in the take up of LNG stretch beyond Argentina to other Latin American countries.
"LNG imports into Latin America in the first half of the year are down by 3 metric MMt (million tonnes), or 28% lower than volumes received over the same period last year," said independent LNG consultant Andy Flower. In Mexico, cheaper pipeline imports from the US pushed out LNG, while Brazil cut imports by 60% as heavy rainfall replenished hydroelectric reserves, Flower added.
In Argentina, sea-borne LNG imports declined by 15% in the same period.
(Reporting by Oleg Vukmanovic, Hugh Bronstein, Juliana Castilla and Eliana Raszewki; Editing by David Clarke)
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