Brazil, Argentina Face Gas Supply Crunch: Rystad
Brazil and Argentina, two of South America’s more powerful economies, will face a natural gas supply crunch by 2025, as imports from Bolivia dwindle and barriers remain to expanding their own domestic gas resources, Norwegian consultancy Rystad Energy reported November 10.
Argentina’s demand in 2020 is projected by Rystad at about 52.5bn m3 and Brazil’s at 24bn m3. By 2025, Argentinian demand will increase to 60bn m3 while Brazil’s will rise to 29.6bn m3.
But domestic supply from both countries already lags demand: Argentina’s production this year is estimated at 42.2bn m3, while Brazilian production is just 20.1bn m3, leaving a 14.2bn m3 supply deficit that is projected to swell to 18bn m3 by 2025.
Bolivia has traditionally met some of that supply gap, Rystad said, and its exports to the two are estimated at a combined 9bn m3 this year.
But Bolivia is facing its own supply problems: production has plummeted since reaching peak levels in 2014, and in 2019, reserves were estimated at just 200bn m3, 30% lower than the previous estimate of 280bn m3. Exports have been cut so that Bolivia can address its own gas needs, and political instability has led many importers to avoid any long-term contracts in the country.
“Even though Argentina and Brazil have extensive gas resources, a lack of pipeline interconnections and low investments pose hurdles in meeting rising domestic demand,” says Rahul Choudhary, upstream analyst at Rystad Energy. “This, coupled with lower gas exports from their traditional trading partner Bolivia, has triggered the need for a significant increase in LNG imports in the near future.”
Brazil has extensive associated gas resources in its offshore pre-salt regions, while Argentina is hoping that foreign investments in the Vaca Muerta shale gas play can help secure domestic needs, and perhaps provide some surplus for export.
But both require long lead times and heavy capital investments, Rystad said, leaving increased LNG imports as the cheapest alternative, given existing import infrastructure already in place.
Brazil is expected to lead the way as it looks to gas to play a greater role in power generation. Three regasification units are already in operation, with annual capacity of about 15bn m3, while three more are in advanced stages of development, promising to double the country’s regas capacity.
Argentina is also looking to bolster its LNG import capabilities, and has increased regas capacity at its existing LNG import terminal by 6bn m3.