Aug. 3 (Bloomberg) -- Argentina is importing record amounts of energy as the coldest winter in 40 years drives up demand and causes natural-gas shortages, prompting Dow Chemical Co. and steelmaker Siderar SAIC to scale back production.
Electricity supplied from Brazil and Paraguay rose to a daily combined record of about 1,000 megawatts on July 12, while consumption peaked at 20,396 megawatts three days later, according to Buenos Aires-based energy broker Cammesa. Shipments of liquefied natural gas are set to double this year.
Dow, Siderar and aluminum maker Aluar Aluminio Argentino SAIC are among companies closing plants, cutting output or seeking alternative energy sources after temperatures in parts of Argentina fell below those of Antarctica on July 15. Rising demand is exacerbating a shortage that began six years ago as economic growth accelerated and energy investment fell. The shortage is boosting costs as companies spend more to guarantee supplies.
“The situation is getting worse, because the shortage period is growing every year,” Gerardo Rabinovich, a director at the General Mosconi Energy Institute in Buenos Aires and an adviser to the opposition Radical Party, said in a telephone interview. “When this started in 2004, it lasted for about a week, then it was two weeks and now it’s more than a month.”
In July, temperatures in Buenos Aires were, on average, 1 degree Celsius below the usual low and high of 8 and 14 degrees (46 and 57 degrees Farenheit), with temperatures plummeting to about 2 degrees Celsius on July 15.
Also on July 15, temperatures in Mendoza, the wine-producing region in western Argentina, fell as low as -8.9 degrees Celsius below the temperature registered that day in the Argentine-controlled area of the South Pole, according to a national weather institute report.
Argentina is bracing for a renewed polar front this month. On Aug. 1, almost half of the country’s 23 provinces registered temperatures below zero, while the northern city of La Quiaca on the border with Bolivia fell to minus 10 degrees Celsius (14 degrees Fahrenheit.) The average low predicated through Aug. 5 is 1 degree, according to the National Weather service.
Dow closed a polyethylene plant in July and reduced operations at another facility to minimum capacity after gas supplies were rationed by the government, said Soledad Echague, a spokeswoman for the Midland, Michigan-based company in Buenos Aires. The cuts were more severe than the company had expected, she said.
“The situation should be under control, as long as the weather improves,” Horacio Mizrahi, a spokesman at Argentina’s Planning Ministry, which oversees the country’s energy policy, said in a July 27 telephone interview from Buenos Aires.
Aluar needs a constant supply of electricity at its 410,000 ton-per-year aluminum smelter in Argentina’s southern Chubut province. The company is buying power to keep the plant running during peak gas consumption hours this winter, a spokesman for the Buenos Aires-based company, who declined to be named under company policy, said in a July 26 telephone interview.
Siderar reduced production to a minimum during peak gas consumption hours in July, according to a company spokesman, who declined to be named, citing company policy.
Argentina has doubled purchases of LNG shipments to 14 this year to address the shortages. Each shipment equals 3 million British thermal units of the fuel. Seven ships were bought last year, according to government data compiled by the Argentine Oil and Gas Institute, an industry research group.
About 300 hundred industrial users have faced reduced power supplies since yesterday, according to reports in local media, including newspaper Clarin, Argentina’s biggest newspaper, and television channel C5N. The cuts started after residential gas consumption rose 42 percent yesterday to 85 million cubic meters (3 billion cubic feet) from 60 million, Clarin reported today.
July and August are Argentina’s coldest months. The winter months have put stress on energy supplies since 2004, when economic growth of an average of 8.5 percent a year stoked demand and price caps on gas, oil and utility prices curtailed investments in the country’s fields and pipelines.
The energy shortages led to restrictions of exports to Chile, which obtained about 80 percent of its natural gas supplies from Argentina until 2009, when it opened the first of two LNG plants. A gas pipeline that links the two countries across the Andes mountains is now practically unused after Argentina curtailed exports to its Latin American neighbor.
Spot Cargo Purchases
Aside from the 14 ships bought through a bidding round earlier this year, Argentine state-owned energy company Enarsa bought at least one spot cargo of LNG this year from Ras Laffan Liquified Natural Gas Co., according to the Qatari company. Enarsa’s head of communications Carlos Davidson did not respond to emails to his office and a phone call seeking comment.
Argentina needs an extra 40 million cubic meters of natural gas to cover the shortages, according to the Mosconi Institute’s Rabinovich. The country uses about 120 million in winter, he said.
Argentina’s Energy Secretary this year hired YPF, a unit of Spain’s Repsol YPF SA, to install a second regasification ship, which will be located on the Parana river off the city of Escobar, in central Buenos Aires province.
The new ship will be located within a radius of less than 200 kilometers from steel plants operated by the Techint Group and Arcelor Mittal’s Argentine unit Acindar. Argentine grain and bean producers and exporters, such as Bunge Ltd. and Cargill Inc., the country’s two biggest exporters in 2009, also have operations in the region.
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