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Argentina aims to lower gas imports this year as Vaca Muerta production climbs

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Argentina aims to lower gas imports this year as Vaca Muerta production climbs

Highlights

No targets have been set on imports

Gas imports totaled 22.6 million cu m/d in 2021

Factories may be asked to reduce consumption

Argentina aims to reduce gas imports this year as rising production from the Vaca Muerta shale play in the country's southwest makes more supplies available, presidential spokesperson Gabriela Cerruti said March 31.

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"Argentina is going to have to import less gas this year than in previous years because it has a greater supply of gas and this has to do with the growth we have had in recent years in terms of gas exploitation in Vaca Muerta," Cerruti said in a televised press conference.

Cerruti did not provide estimates on imports or production.

Gas producers have been increasing output over the past year, buoyed by a program that pays above-market prices of around $3.50/MMBtu for some additional supplies, up from less than $2.50/MMBtu between October 2019 and April 2021. As a result, production has shot up 14% to 130 million cu m/d in February from 114 million cu m/d in April 2021, led by Vaca Muerta, one of the world's biggest shale plays.

While output is still short of the 140 million cu m/d of average gas consumption, which peaks at 180 million cu m/d in the winter months of June, July and August, the government appears to be betting that continued production growth will meet some of that demand without having to increase imports.

Argentina imported 22.6 million cu m/d of gas in 2021 from Bolivia and off the global LNG market, up 13.6% from 19.9 million cu m/d in 2020, according to data from the Energy Secretariat. Of the imports, most of the growth last year was in LNG, which rose 91% to 9.7 million cu m/d from 5.1 million cu m/d in 2020, in part because Bolivia's production is in decline.

In another effort to reduce gas imports because of a surge in LNG prices this year on tighter global supplies in the wake of Russia's war on Ukraine, Cerruti said the government is considering multiple ways to reduce imports.

"We are taking all the necessary measures so that there is no shortage of gas and so that international prices do not impact Argentina," the spokesperson said.

These measures, she added, will be made public next week, but hinted that it could mean reducing consumption of both gas and diesel, which is imported at times of peak demand to replace the former in power plants.

"There is a lack of gas and oil in the world and it has exorbitant prices as a result of what is happening in the war in Ukraine," Cerruti said. "All sectors can sit down in solidarity to find the solution."

Argentina may pay between $35/MMBtu and $45/MMBtu to import eight cargoes of LNG for delivery this winter, the result of an auction this week for supplies, according to local media reports. That would be up from the $7-$13/MMBtu it paid last year to import 56 cargoes, according to data from IEASA, a state company that handles the imports.

IEASA declined to comment on the results of the auction this week for the eight cargoes.