Argentina’s 1st cold spell slams natgas supplies, disrupts plants

02 May 2012 20:20  [Source: ICIS news]

Dow Chemical site at Bahia Blanca ArgentinaHOUSTON (ICIS)--Low temperatures created the first major disruption of natural gas supply to industrial users in Argentina over the long weekend, industry sources said on Wednesday.

Argentina’s controversial to move to wrest control of energy producer YPF from Spain’s Repsol could result in even more natural gas shortfalls.

The companies affected range from steel mills to petrochemicals and fertilizer producers.

The reduction of gas started about six days ago, an industrial user said, but the situation began to normalise on Wednesday with rising temperatures.

The local press described the problem as affecting more than 200 companies, which suffered supply restrictions.

One of the consequences of the gas restrictions was the stoppage of Dow’s 120,000 tonne/year high density polyethylene (HDPE) plant in Bahia Blanca, which was now restarting, a company source said.

Dow is addressing shortages of ethylene with a shipment from United Arab Emirates (UAE) scheduled to arrive in Argentina by mid-May.

No shortages of HDPE have ensued because the producer has “reasonable inventories” to deal with this type of emergencies, although stocks are admittedly “below ideal levels”.

With higher temperatures in the weather forecast, it was believed that the situation is under control, at least in the short term.

“The first cold spell is always tough, because it takes people by surprise,” an industrial user said with carefully measured words.

The winter is only starting in Argentina and many sources in industry fear further disruptions of natural gas supply, including less liquefied natural gas (LNG) imports.

Argentina energy producer YPF has a sizable contract to supply several cargoes of LNG to Argentina’s government–run ENARSA May to August.

But Argentina’s conflict with Spain’s Repsol over the nationalisation of YPF threatens those LNG shipments.

YPF said in a statement on Saturday that Repsol had “unilaterally” decided to cancel its LNG supply deal, prompting the Argentine company to increase gas supply from Bolivia and ramp up domestic production to make up the expected LNG shortfall.

Repsol has obligations for 10 cargoes to be imported to Bahia Blanca in 2012, but the Spanish company is not expected to deliver the first cargo, which is scheduled for 14 May delivery slot.

Additional demand for natural gas by Brazil, which is seeking to compensate for decreased hydroelectric production caused by a drought, will likely make LNG shipments more scarce and expensive, at a time when the Argentine government is trying to minimise the energy import bills.

Additional reporting by Ryan Hickman, ICIS Heren

By: George Martin
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