Imports of liquefied natural gas (LNG) in South America are down sharply this year amid market volatility and a resurgence of hydropower in Brazil, while pipeline gas imports to Mexico have held relatively firm.

Mexico

Kpler analyst Ryhana Rasidi told NGI that around 2.6 million tons (Mt) of LNG has landed in South America this year as of the end of May. That’s 0.99 Mt lower than volumes seen last year in the same period. Last year, Brazil imported record volumes of LNG during a drought that peaked around the early summer.

Analysts from Goldman Sachs Commodities Research estimated that LNG demand from South America this year could fall 5.3 million metric tons/year (mmty) compared with last year. Demand could fall an additional 0.9 mmty in 2023, according to their estimates. 

Rasidi told NGI that Brazil has imported 0.77 Mt less than the same time last year, with 1.14 Mt in cargoes by the end of May. Chile has taken 0.22 Mt less in volumes, totaling 1.11 Mt at the end of last month.

Latin America’s largest gas consumer by far, Mexico, is a different story from South America in that pipeline gas imports from the United States have mostly displaced LNG cargoes in recent years.

Those pipeline flows have declined only slightly to 5.51 Bcf/d year-to-date versus 5.59 Bcf/d for the same span last year.

Over the last few years, though, Mexico’s imports have generally trended upward.

U.S. natural gas exports to Mexico averaged 5.9 Bcf/d in 2021, 99% of which was sent by pipeline, according to the U.S. Energy Information Administration. This was up from 5.45 Bcf/d in 2020. Several LNG export projects also are in the works on Mexico’s Pacific Coast, with the objective to re-export molecules imported via pipeline from the United States. 

In South America, meanwhile, Rasidi said LNG imports to Argentina and Colombia “stayed relatively flat from the previous year at around 0.37 Mt and 0.01 Mt, respectively.” 

Rasidi said Argentina has adapted to more volatile global commodity markets. While its hydropower generation levels haven’t “picked up as much as in Brazil,” it has been able to offset the costs of its greater reliance on LNG imports “with the help of higher prices for its soybean exports.”

As the prices for both oil and gas linked to Henry Hub continue to reach new heights, South American countries are also diversifying their sources of LNG. Rasidi said the share of U.S. LNG imported by South America fell from 81% to 58% year/year. Rasidi added that the majority of the drop in U.S. volumes “has clearly been the result of more U.S. exporters focusing on cargoes to Europe earlier in the year.”

[Mexico Matters: Cross-border energy trade between the U.S. and Mexico reached $42 billion last year. Understand this burgeoning trade flow — the projects, politics and natural gas prices — with NGI’s Mexico Gas Price Index. Know more.]

At the same time, the share of LNG from Equatorial Guinea grew to 18% from 2%. Trinidad and Tobago LNG volumes climbed to 15% from 11%. South American countries also started importing from new sources. The continent grabbed 3% of its imported gas from Egypt for the first time, and Nigeria accounted for 1%.

The United States increased its average daily export volumes during the first four months of the year by about 18% compared to last year’s average. The boost was largely attributed to additional capacity from the Sabine Pass and Calcasieu Pass export facilities that came online this year. However, any additional export capacity has been heading to Europe, with the United States sending 74% of its LNG to European destinations. That compares with 34% for all of 2021.

Andrew Baker contributed to this story.