Natural gas production in Argentina decreased by 9.2% year/year in May to 124.4 million cubic meters/day (MMm3/d), or 4.39 Bcf/d, according to the latest report by the IAE Argentine Energy Institute.

Analysts blamed the movement restrictions in place because of Covid-19 leading to lower activity and reduced demand. Argentina has had one of the strictest lockdowns in place globally since the pandemic began to spread in March. 

Conventional gas production, which accounted for 57% of the 4.39 Bc/fd, fell by 10.6% in May versus the year-ago period, while unconventional production, including from the Vaca Muerta shale deposit, decreased by 7.2%.

While natural gas production has been in decline since March, the May figures showed an improvement. In April, when Argentina announced no rigs were running, gas production decreased 11.3% year/year to 116.7 MMm3/d, or 4.12 Bcf/d.

Energy demand is also showing an uptick.

Although natural gas demand figures were not available for the month, gasoline and diesel sales in May decreased by 27.2% year/year. In April, demand for gasoline and diesel fell by 43.9%, according to the IAE report.

Natural gas demand has not been hit as hard as other fuels in Argentina because of the lockdown restrictions. Total gas demand decreased 7.9% in April compared to April of last year, the report said, the latest month for which information was available.

To meet demand, Argentina’s state-owned Integración Energética Argentina (Ieasa) purchased 28 liquefied natural gas (LNG) cargoes for the Southern Cone winter at a record price of $2.87/MMBtu on average, the company said last week.

Ieasa said LNG is supplying about 25% of the country’s natural gas needs during the winter.

Activity has begun to pick up slowly in unconventional plays in the Vaca Muerta in western Argentina, according to media reports based on information from services company NCS Multistage. 

There were 196 hydraulic fracturing (fracking) stages completed in Argentina in June, compared to 28 in May and zero in April. By comparison, the country in 2019 saw an average of 700 frack stages per month.

In response to the demand destruction and adverse market conditions, the government has instituted a $45/bbl oil price floor for producers to try to motivate exploration and production. It’s expected that new laws on natural gas pricing will ensue, with a price figure of around $3.50/MMBtu being studied.

Through June, subsidies paid to Compañía Administradora del Mercado Eléctrico Argentino (Cammesa), which buys the nation’s gas and is in charge of guaranteeing power supply to Argentina, amounted to $2.05 billion, according to the IAE report.