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Repsol to cancel LNG shipments to Argentina

LNG Industry,

Repsol is highly likely to cancel the remaining 9 cargos of LNG, which are due for delivery to Argentina this year after the Argentinian Congress passed a bill by a large majority to seize Repsol’s 51% stake in the company. Repsol cancelled the first shipment on the grounds that Enarsa, Argentina’s national energy company, lacked financial payment guarantees

Repsol has already cancelled one of the planned shipments and is likely to cancel the rest in retaliation at the expropriation of Repsol’s share in YPF. Compensation has still not been settled and Argentina is currently refusing to pay the US$ 10.5 billion that Repsol has asked for. This means that the dispute will almost certainly go to the World Bank International Center for Settlement of Investment Disputes, known as Ciadi, which would almost certainly make Argentina pay a fair price.

According to Reuters, YPF said on Saturday it was certain Repsol would cancel the LNG shipments.

Should Repsol halt the remaining shipments, it will put further pressure on Enarsa to deliver enough gas to the country. It currently needs 80 cargos but has only been able to track down 51 because price constraints have meant it is unwilling to sign long-term supply. As a result it is exposed to price volatility of the international LNG spot market and will have to pay more.

In the short to mid-term the nationalisation of YPF is unlikely to increase domestic production of oil and gas and drive down prices because as many analysts have pointed out, the reason that Repsol was not able to increase output was because of restrictive government price controls and regulation.

Written by Peter Farrell.

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