Argentina is getting help from neighbouring Bolivia in its bid to muddle through the upcoming southern hemisphere winter without rationing natural gas supplies.
Bolivia agreed to send extra fuel in the cold, high-demand months of May to September, according to Argentine government statements. The Andean nation is currently shipping roughly 7.5 million cubic meters a day to Argentina by pipeline, but talks to ramp up provisions in winter were at an impasse because Bolivia’s production has been declining and it’s been prioritising sales to Brazil, a larger economy.
There’ve been concerns in Argentina that it will have to ration gas for big industrial users like fertilisers makers and aluminium smelters if it can’t afford shipments of liquefied natural gas, or LNG, whose prices have sky-rocketed as buyers from the United Kingdom to Japan scramble to replace Russian supplies.
Bolivia finally agreed to send Argentina at least 14 million cubic metres a day in the winter – and Argentina has first dibs on up to 18 million cubic meters – at an average price of about US$12 per million British thermal units. The Bolivian provisions would substitute 14 cargoes of LNG that’s trading at more than US$35, saving cash-strapped Argentina US$770 million, according to Energy Secretary Dario Martínez.
“This is good news for Argentina, for the Central Bank’s dollar reserves and for the government’s fiscal plan,” Martínez said in a statement.
The 14 million cubic meters is the same volume that Bolivia signed up to last year but less than the 20 million it sent at the height of winter in 2020, according to state news agency Télam.
Despite owning shale deposits that give it huge export potential, Argentina’s natural gas production can’t even meet domestic demand because a bad business climate has constrained investments, especially in pipelines.
Argentina signed a 20-year gas deal with Bolivia back in 2006 before any wells had been drilled in vast shale formation Vaca Muerta. Volumes and pricing are regularly renegotiated.
by Peter Millard & Jonathan Gilbert, Bloomberg