Argentina plans to discontinue LNG imports as domestic gas production increases over the next few years, even as it pays less for the supplies after ending the alleged corrupt practices of the previous administration in the gas trade, President Mauricio Macri said Wednesday.
"It's going to take five to six years for us to stop importing gas by tanker, which is very expensive," Macri said at the opening of an expanded port terminal in Ingeniero White, Buenos Aires province.
Macri's energy minister, Juan Jose Aranguren, set the same target for bringing an end to LNG imports, saying earlier this week that this will save the state money on the supplies, which cost more than local production, and on renting two floating regasification plants at $100,000/d.
Argentina started importing LNG in 2008 to plug a widening gas deficit as demand surged and production fell. It now relies on imported gas supplies from Bolivia, Chile and from the LNG market to meet a third of its 130-180 million cu m/d of demand.
This year, the country is paying an average of $6.50/MMBtu for 85-90 cargoes, equivalent to 25 million cu m/d in send-out capacity. The price is more than the average $5.20/MMBtu wellhead price for domestic production of 121 million cu m/d and the $3/MMBtu for 15-20 million cu m/d of supplies piped in from Bolivia.
However, the LNG price is less than in previous years, when Argentina paid as much as $16/MMBtu and even more for supplies, in part because of higher reference prices at the time.
Another reason for the inflated prices was corruption, Macri said.
"We are negotiating much better prices than previous ones because there is no hidden 'bonus', " for officials, Macri said in his televised address.
"That very funny phrase of 'Your take is included' is not happening with this government," he said. "We are taking care of what is everybody's."
Macri did not point his allegations to anyone in particular.
The Planning Ministry, which no longer exists, oversaw the LNG imports during the previous government of former President Cristina Fernandez de Kirchner. Enarsa, a state-owned energy company, called the tenders, and was helped with the logistics by YPF, a state-run company that produces most of the country's oil and gas.
Julio De Vido, the former planning minister, and other officials are under investigation for allegedly taking bribes and inflating prices for LNG imports, including paying for a cargo that never arrived. Big suppliers have been and continue to be BP, Glencore, Gazprom, Shell and Trafigura, among others.
De Vido is one of a number of senior officials from the previous governments of Fernandez de Kirchner and her late husband Nestor Kirchner, who ruled successively from 2003 to 2015, to face corruption charges since losing power in December.
BOOSTING DOMESTIC PRODUCTION
To reduce LNG imports, Macri's right-of-center government has doubled wellhead gas prices to an average of $5.20/MMBtu to encourage investment in boosting production. He has also extended an incentive price of $7.50/MMBtu for output from new developments.
The incentive price, implemented in 2013, has already helped revive gas production, which was up 6.6% to an average of 121.2 million cu m/d in the first four months of 2016 from a 10-year low of 113.7 million cu m/d in 2014.
Much of the production growth has come from shale and tight plays like Vaca Muerta and Mulichinco.
Macri also called on society to reduce energy consumption, saying this will also help cut the pricier imports.
"We must help by being more frugal, by being careful with energy," Macri said.
