Starving for Natural Gas, Argentina Gets Relief From Bolivia
(Bloomberg) -- Argentina is getting help from neighboring 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 prioritizing sales to Brazil, a larger economy.
There’ve been concerns in Argentina that it will have to ration gas for big industrial users like fertilizers 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 U.K. to Japan scramble to replace Russian supplies.
Bolivia finally agreed to send Argentina at least 14 million cubic meters a day in the winter -- and Argentina has first dibs on up to 18 million cubic meters -- at an average price of about $12 per million British thermal units. The Bolivian provisions would substitute 14 cargoes of LNG that’s trading at more than $35, saving cash-strapped Argentina $770 million, according to Energy Secretary Dario Martinez.
“This is good news for Argentina, for the central bank’s dollar reserves and for the government’s fiscal plan,” Martinez 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 Telam.
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.
©2022 Bloomberg L.P.