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Argentina’s ENARSA secures short-term LNG volumes amid Repsol uncertainty

07 May 2012 10:06:05 | lmd

Argentina's state-run LNG buyer ENARSA has not received a formal notification from Repsol that the Spanish company will not deliver on nine contracted cargoes it had won in a previous tender.

However, ENARSA is pursuing additional import volumes amid the shortages the company faces heading into the southern hemisphere winter, a source in Argentina told ICIS.

Repsol has not decided on plans for the nine remaining cargoes this year in Bahía Blanca and is assessing it internally, ICIS understands.

ENARSA has been bound by a tender process to secure LNG cargoes, but the state-run gas incumbent has not launched a formal call to market and has been negotiating one-on-one with companies for its future import needs. "Sellers have been willing to supply to Argentina," the source said.

ENARSA has yet to firm up a commitment for extra volumes over the winter, where the government-backed company could be facing a shortage of up to 11 cargoes to Bahía Blanca until the end of August. However, a source close to ENARSA said that the ongoing negotiations are encouraging and the feeling is positive for near-term procurement.

A trader said ENARSA has procured at least two cargoes since it began negotiating unilaterally with LNG traders.

The newly secured cargoes are for delivery into Argentina in the second and third quarters, ICIS understands. Offers into Argentina remain at Henry Hub plus $15.79/MMBtu, which was the price US-based Excelerate Energy finalised with ENARSA for the July cargo.

Petrobras sells to ENARSA

In Brazil, the Petrobras-controlled 126,000m³ LNG Capricorn left Petrobras's Guanabara Bay terminal on 3 May for what appears to be delivery for ENARSA. The tanker is scheduled to arrive at ENARSA's Escobar terminal on 5 May, according to ship tracking data.

The recent string of LNG cargoes being rapidly absorbed by Petrobras in April has lengthened its supply position, as trade sources indicate that the Brazilian company is now offering volumes. At least five LNG cargoes arrived in Brazil during April and at least four are scheduled into Petrobras's two terminals in May, according to shipping records. Sources said Petrobras paid above $16.00/MMBtu for the DES (delivered, ex-ship) cargoes, but it remains unclear if the company will sell at DES or FOB prices and at which level.

As a result, the ICIS Heren Brazil DES price has dropped, to reflect the price Petrobras would have to pay if it did need a DES cargo.

Petrobras has authorisation to re-export LNG cargoes from its terminals and has sold cargoes from Brazil three times since the government approval in 2011.

The aggressive move into the LNG market by Petrobras over the past two months was driven mainly by the lack of hydroelectric generation and inventories in the southern region of the country. However, Brazil's hydroelectric power sector had mixed results in April, according to data from the country's power authority, Operador Nacional do Sistema Elétrico (ONS).

Brazil's hydro output mixed

Stored energy levels in the southern area of Brazil were down by 60% year on year in March, but inventories in the south were up by 7% in April versus March. In total, stored energy in Brazil fell by almost 3% month on month, ONS said.

The contrasting hydro figures underscored the volatility in Brazil's electricity market and Petrobras's need to pivot quickly from a LNG buyer to seller.

"They definitely get swung on their hydro," an Atlantic Basin trading source said.

Hydroelectric power generation for the country slid by 13% for April compared with the previous month, with only the northern region remaining flat, according to ONS.

Domestic power demand was up by 4% for Brazil in April compared with the same time a year ago, although demand dropped month on month, according to ONS.

Analysts from the meteorological firm MDA EarthSat show greater chances of precipitation in the six-to-10 day forecasts in southern Brazilian states, particularly across southern Mato Grosso, southern Goias, Mato Grosso do Sul, Sao Paulo and Parana.

At the same time, Petrobras's domestic natural gas production has dropped slightly in recent months, according to the state-run oil and gas company. The most recent production figures, which are for March, show an output of 56.2m cbm/day, down by 1% from February, Petrobras said.

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