Argentina LNG poised to meet peak Asia demand

Abundant gas reserves in Vaca Muerta are laying the groundwork for Argentina to become a seasonal liquefied natural gas (LNG) exporter — competing directly with U.S. LNG, Kallanish Energy reports.

According to new research from Wood Mackenzie, rising natural gas production in the country, coupled with competitive global LNG transportation costs, are set to position Argentina as an emerging source of gas supply to Asia during peak demand periods.

Increasing seasonality

Global LNG demand is showing increasing seasonality, and peak potential LNG production in Argentina during the summer months would coincide with strong winter demand from utilities in Asia.

“The seasonal dynamic could attract Asian buyers and present a strong economic case for Argentinian LNG,” the consulting firm said this week. In addition, Argentinian LNG liquefaction plants have lower shipping costs to reach Asian markets than U.S. Gulf Coast facilities, avoiding potential Panama Canal congestion and presenting an overall cheaper alternative to U.S. exports.”

Major LNG production expected in 2024

Thanks to Vaca Muerta, Argentina’s production in the Neuquén Basin will ramp up over the next few years, with major scale LNG production expected to start in 2024. It could produce 6 million tonnes per annum (Mtpa) of LNG in that year, growing to 10 Mtpa by 2030, Wood Mackenzie forecasts.

The firm estimates breakevens for Argentina LNG of $8 per million British thermal unit (MmBtu) at delivery ex. ship for Japan.

“Vaca Muerta’s gas production has dramatically changed the outlook for Argentinian gas,” Mauro Chavez Rodriguez, Wood Mackenzie analyst for LatAm Gas & LNG, told an audience at the Gastech conference in Houston.

LNG exports could be a 'solution'

“Not even the domestic demand and exports to neighboring countries such as Chile and Brazil are enough for Vaca Muerta’s gas potential. LNG exports could be a solution that enables Vaca Muerta’s production to continue the growth story,” he said.

Rodriguez added Argentina could be interesting to players who want to diversify supply outside North America, and benefit Asian utilities looking to contract just for their peak demand months in the northern hemisphere.

“Some Asian players are already active in the Argentinian shale. Petronas is participating with YPF in the joint venture of La Amarga Chica, while CNOOC participates indirectly through its subsidiary, Pan American Energy, in the Aguada Pichana Oeste,” he noted.

Source:Kallanish Energy   www.kallanishenergy.com