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Steady as she goes

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LNG Industry,


In February 2016, Cheniere Energy loaded its first cargo from the Sabine Pass LNG terminal in Louisiana, US, onto the 160 000 m3 Asia Vision LNG carrier for delivery to Brazil’s Guanabara Bay LNG terminal.1 This cargo represented an auspicious beginning for the Latin American LNG trade in 2016, which still remains a relative newcomer to the industry. As shown in Table 1, which highlights key LNG importers in the Americas, Latin American LNG imports steadily increased throughout the 2000s and, in 2014, the region consumed 22.3 million t of LNG, which accounted for approximately 9% of the total global LNG trade. In 2015, the global demand for LNG increased 2.5% over 2014, and Mexico, Brazil, Argentina, and Chile continued to represent Latin America as active LNG consumers, each within the top 15 LNG importers worldwide.2

Most of Latin America’s demand for LNG is driven by the region’s push to gas-fired electricity generation and diversification away from hydroelectric power. Currently, the region produces approximately 640 million m3/d of natural gas (approximately 7% of natural gas production globally) and consumes approximately 700 million m3/d.3 Consequently, in 2016, many nations in the region continued their push to develop the corresponding LNG regasification infrastructure that is needed to accommodate their LNG import demands. An expanded LNG regasification infrastructure makes particular sense for Central and South America, where LNG complements the current system of hydroelectric generation, and larger imports of LNG can be arranged relatively quickly on the spot market (albeit, typically at a premium over long-term contracted quantities) in the event of insufficient rainfall.

Rather than undertake large scale, up-front investment in multi-billion dollar onshore LNG regasification facilities, many developers in the region have instead opted for the use of floating storage regasification units (FSRUs). Performing functions similar to traditional onshore regasification facilities at a fraction of the initial investment and lead time, FSRUs are floating vessels that receive LNG from an LNG tanker, process, store, and regasify the natural gas onboard, and then offload the regasified natural gas, typically into a pipeline. The FSRU is usually moored in place for a period of time, and can be transported and used in other locations, leaving behind minimal infrastructure.

Currently, several Latin American countries have FSRU terminals. Brazil has three, Argentina has two, and Chile, Colombia and Uruguay are in the process of developing such terminals. It is likely that, going forward, key players in the Latin American regasification sector will continue to rely on the use of FSRU terminals for continued growth and stability.

However, despite the continued development of LNG regasification infrastructure in Latin America, the broader economic trends are foreboding. The drop in international commodity prices, both in the hydrocarbon and mining sectors, have slowed the economies of several nations within the region. The growth rates in these countries have stalled, or, as in the case of Brazil, have gone into recession. Furthermore, most currencies have also devalued against the US dollar. These factors are likely to complicate or delay LNG regasification infrastructure development projects that are in their early to middle stages.

The remainder of this article surveys the key developments in LNG regasification infrastructure development in the larger economies of the region in 2016. It also addresses other related notable developments in the energy sectors of these countries and the related impacts of and inter-relationships with the global LNG trade.

Argentina

The election of Mauricio Macri as the President of Argentina in November 2015 offered promises of transformative change for the country. By April 2016, these promises became reality when the government both settled with longstanding hold-out creditors on previously defaulted Argentine sovereign debt and returned to the international capital markets with a new US$16.5 billion bond issuance. Continuing with this trend…


This article was originally published in the August 2016 issue of LNG Industry magazine. To read the full version of this article, please sign in or register for a free trial.


Written by Carlos Solé and Lindsey Swiger, Baker Botts, USA. Edited by

References

  1. STOBBART, L., ‘Cheniere preparing to load second LNG cargo from Sabine Pass: sources’, Platts, (11 March 2016), http://www.platts.com/latest-news/natural-gas/london/cheniere-preparing-to-load-second-lng-cargo-from-21082830. 
  2. DUBE, R., ‘Oil & Gas Intelligence Series: LNG Continues Expansion in Latin America’, Business News Americas; The International Group of Liquefied Natural Gas Importers – 2016 Status Report. 
  3. CRITCHLEY, A., ‘LatAm must expand regasification capacity’, Business News Americas, (4 May 2016), http://subscriber.bnamericas.com/Subscriber/en/news/oilandgas/latam-must-expand-regasification-capacity/.

Read the article online at: https://www.lngindustry.com/special-reports/12082016/steady-as-she-goes-1479/


 

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