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ECONOMY | 29-05-2024 11:34

Argentina faces natural gas crunch as worst winter since 1980 looms

Government scrambles to secure supplies of fuel as lower-than-expected temperatures boosts demand for home heating.

Argentina is scrambling to secure supplies of fuel as winter bites in the southern hemisphere with lower-than-expected temperatures boosting demand for home heating.

Extra imports are a headache for President Javier Milei’s government, which needs to build up reserves of dollars through trade surpluses — not lose them — in order to lift currency controls that have been strangling the economy.

Milei’s spokesman said consumer demand for natural gas has spiked 55 percent in recent weeks to nearly 70 million cubic metres a day. “We’re making all efforts to avoid” a heating shortage, Manuel Adorni told reporters Wednesday at a daily press briefing. “It’s the harshest winter in the last 44 years.”

With families in the Buenos Aires metropolitan area, which is home to about a third of Argentina’s 46 million people, switching on heating for longer in recent days, the government has been caught off-guard. It’s been forced to buy additional natural gas and prioritise residential users by cutting off supplies to factories and to drivers who run their cars on compressed gas.

As well as the purchases of liquefied natural gas (LNG) — including a rare spot cargo for immediate delivery, for which it paid above-market prices — the government also plans to import other fuels to supply power plants that normally run on natural gas.

The predicament is a reality check for Argentina, which has vast reserves of gas in the Vaca Muerta shale patch and ambitions to be a net exporter. But the country needs to expand transportation capacity to unlock more production.

While a new shale gas pipeline was added to the grid last year, construction of compressor stations that would double its capacity is delayed.


 

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by Jonathan Gilbert, Bloomberg

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