Argentina wishes to change the rigid terms of a key gas import contract with Bolivia to match seasonal fluctuations in demand and in the longer term to cut or even eliminate the expensive LNG imports while boosting its own production, an official has said.
Bolivia is South America’s largest natural gas exporter. It is largest export earner. However rising output and contract re-negotiations in main customers Brazil and Argentina threaten its dominance when its production and reserves are both falling.
Daniel Redondo, secretary of energy planning in Argentina’s Energy and Mining Ministry, said the government wants to modify the take-or-pay contract with its northern neighbour, which expires in 2026, to permit seasonal shifts that could drastically reduce costly LNG imports in the winter.
“We will need to import LNG during the winter unless we reach a deal with Bolivia where supply, instead of being flat throughout the year, peaks in the winter. It is something we want to do with Bolivia,” he told a gathering of Japanese business leaders.
Argentina, once a net energy exporter, now imports around 20% of its natural gas needs, Redondo said. Most comes from Bolivia, while the rest comes from around 70 shipments of LNG a year and some re-gasified LNG piped across the border from Chile.
Rising natural gas output in its Vaca Muerta shale play could let Argentina export excess gas to Chile in the summer, he said.
“We think that because of the development of Vaca Muerta, Argentina will be able to supply 100% of the country’s demand in 2021, except the winter months,” Redondo said.
Since taking office in December 2015, President Mauricio Macri has sought to lower labour costs and improve infrastructure to attract foreign investment to the Patagonian shale formation.
But investment in the play has remained well below the estimated $10 billion per year needed, Redondo said, leaving Argentina – home to the world’s second-largest shale gas reserves – unable to cover demand that boomed under former populist President Cristina Fernandez, who implemented generous gas subsidies.
Argentina’s residential natural gas demand in the summer is 12-15 million cubic meters per day, but that rises to 65-70 million in the winter, Energy Minister Juan Jose Aranguren said in December.