Latin American liquefied natural gas (LNG) demand has had a record year in 2021 and it is not letting up, tightening a global gas market that has sent prices spiking around the world.
Imports of LNG into Latin America for the first eight months of the year added up to 10.44 million tons, according to market research firm Kpler. Imports were 120% higher than in the comparable period last year, and up 36% compared with the January-August period in 2019.
LNG imports into Latin America to date in September, at 1.02 million tons, are already double the entire month of September 2020, according to Kpler.
Brazil, which is heavily dependent on hydroelectric power for its electricity, is facing a record drought and is leaning on LNG to keep the lights on. To date in September, Brazilian LNG imports have totaled 654,000 tons, versus zero cargoes in September 2020.
“The country is continuing to struggle with the effects of the drought which is weighing on hydropower generation,” Kpler analyst Laura Page told NGI. She added that the country could see some relief in the coming weeks as peak rainfall season sets in. Brazil is still expected to continue importing higher levels of LNG through next year, which could also be aided by new import terminals that are under construction, Page said.
Argentina and Chile LNG imports have also been robust, in particular during the colder May-September months, according to Kpler data.
“LNG imports into Latin America continue to reach strong levels,” Kpler analyst Charles Costerousse told NGI. He said the region saw “record demand” during the summer months in North America, “led by very strong buying behavior from Brazil and especially Argentina.”
Argentina brought on a second LNG import option in May following lower than expected domestic gas production and rising demand.
Latin American LNG imports have continued to be hot so far this September, with the 1 million ton mark already eclipsed for the fifth consecutive month. Kpler is forecasting that in September, Latin America LNG imports should total around 1.5-1.6 million tons.
“This continues to pull some of the much-needed ex-U.S. cargoes away from Europe, as 89% of September volumes into Latin America were sourced from the United States,” Costerousse said. Qatar and Equatorial Guinea supplied the rest, at 6% and 5% respectively.
The Latin American demand picture comes amid limited natural gas supplies in Europe. Prompt natural gas prices in northwestern Europe were recently near $26/MMBtu. However, unseasonably high Japan-Korea Marker (JKM) prices are also luring spot LNG cargoes to Asia.
In light of the crisis, the International Energy Agency on Tuesday issued a statement urging Russia to send more supplies to Europe and to inject more gas into storage for the upcoming winter to confront the crisis. The global energy watchdog said the drought in Latin America was part of the global puzzle leading to short storage inventories.
Mexico To Cash In?
Mexico now relies mainly on gas pipeline imports from the United States to meet demand, but interest from Asian buyers amid the pricing and demand frenzy is leading to new interest in a trio of Mexico export projects.
Mexico Pacific Ltd. LLC (MPL) CEO Doug Shanda told NGI’s Mexico GPI earlier this month that 22 million metric tons/year (mmty) of binding offtake capacity is under negotiation for the company’s LNG project in Puerto Libertad, including 14 mmty for which memorandums of understanding have been signed.
Meanwhile, Mexico’s CFEnergía in August said it was seeking formal expressions of interest from private sector firms to build and operate a natural gas pipeline and floating LNG terminal targeting the Asian market. And San Diego-based Sempra is also advancing plans to expand the Energia Costa Azul export project in Mexico, CEO Jeffrey Martin said during a recent earnings call.
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