Argentina opens door to regional LNG supply: GNLM

OREANDA-NEWS. February 15, 2016. A landmark plan for Argentina to buy natural gas from Chile this winter paves the way for Pacific Coast LNG imports to supply the wider southern cone, GNL Mejillones chief executive Jean-Michel Cabanes says.

"This is great news for GNLM. Not necessarily because of the additional volumes (one or two cargoes in 2016), but because of the strategic impact and room for the future," Cabanes tells Argus.

GNL Mejillones, controlled by France?s Engie with a 63pc stake, is a 5.5mn m?/d regasification terminal in northern Chile?s mining heartland. The terminal?s 37pc partner is Chile?s state-owned mining company Codelco.

The underutilized facility is gearing up for more activity driven by a future electricity interconnection with central Chile and the planned exports to neighboring Argentina.

Under a framework plan that Chilean energy minister M?ximo Pacheco agreed to with Argentinian authorities last month, Argentina's state-run Enarsa would buy 5.5mn m?/d of gas from Chile. Of the total, 4.4mn m?/d would come from the Quintero LNG terminal on the central coast, and 1.1mn m?/d from Mejillones.

Chile would supply the gas to Argentina through existing gas pipelines built in the 1990s, before Argentina started cutting off gas exports to its neighbors in 2004 because of its own shrinking production. Those pipelines have been mostly empty for the past decade, leaving much of the capital investment unrecovered.

The traumatic cut-off of Argentinian gas supply triggered the launch of Chile?s LNG imports through Quintero in 2009, and a year later in Mejillones. Just over a decade after Buenos Aires started shutting off the taps, the tables have turned.

Negotiations among the various oil, power and gas transportation companies to firm up the details of the gas deal are now underway, with an eye toward initiating supply in May 2016.

For the northern supply, Engie?s local gas distribution subsidiary Solgas would buy the LNG from Engie itself or through Engie?s Chilean generator E-CL, and sell the gas to Enarsa on the Chile-Argentina border, according to Solgas chief executive Diego Stabile.

Solgas could activate a terminal use agreement with GNL Mejillones, or buy the gas on Chile?s secondary market. At the same time, Solgas would sign a transportation agreement with E-CL gas pipeline Norandino to ship the gas to Enarsa, Stabile says.

The 7.1mn m?/d Norandino pipeline is one of a series of cross-border lines built in the 1990s to transport Argentinian gas to Chile. Like the 9mn m?/d GasAndes line in central Chile, Norandino would be reversed to bring Chile?s regasified LNG across the Andes to Argentina.

The agreement with Argentina would cover the southern hemisphere months of May to September, when Argentina?s own LNG imports usually spike in response to higher demand.

Gas from Quintero would come from surplus supply mainly in the hands of Chilean state-run Enap, which would coordinate the shipments to Argentina. Its fellow offtakers from Quintero, Spanish GNF-controlled Metrogas and Italian Enel-controlled Endesa, would also provide some of the central coast supply.

Cabanes says the Argentinian opportunity opens the door to other southern cone gas buyers.

"Uruguay and Paraguay show the most interest in importing gas through the same solution, via a Pacific Ocean terminal and through the Argentinian gas transmission network," Cabanes said.