Total Latin American LNG imports rebounded y/y in April, growing by 0.18 Mt to 1.46 Mt. Chile took 0.25 Mt (133%) more y/y at 0.43 Mt, Argentina imported 15% (0.02 Mt) more LNG y/y over the month and Mexican LNG imports increased by 0.06 Mt y/y to 0.42 Mt. In contrast, Brazilian imports remained very weak.
Indicative data show that Brazil imported 0.19 Mt of LNG in April, which is lower by a huge 0.21 Mt (53%) y/y, following a trend that has seen LNG takes drop y/y in every month since January 2016. Stronger domestic gas production, in tandem with a build-out in wind and hydro capacity (e.g. the Belo Monte dam), have been behind the declines. Though the economy is set to return to growth this year, recent protests against the Temer presidency continue to highlight political uncertainty in the country and, in turn, risks on long-term LNG import growth going forward.
The other key trend to watch in Latin America remains Argentina’s development of its shale resources. Lagged data show domestic production reached 3.78 bcm in March, slightly higher y/y. In terms of development, Total is set to spend $500 million within the next three to four years in the Vaca Muerta shale play as Argentina’s government has pledged a minimum price for gas to encourage investment and accelerate production. The displacement of LNG with domestic production remains a fundamentally bearish trend for imports into the region that we see continuing.
Chilean LNG imports more than doubled in April, stepping up by 0.25 Mt y/y to hit 0.43 Mt. These healthy imports, which come as the country is preparing for peak winter demand season, brought LNG stocks in the first week of May to a record 0.28 bcm, which is 71% higher y/y. Chile is also expected to export around 90 mcm a month of gas to Argentina from June to August, with reports suggesting that the imports will be sourced from Chile’s Quintero LNG terminal.
We are forecasting a 1.6 Mt y/y reduction in 2017 LNG imports into Latin America, which is a moderately smaller drop than last month’s forecast of a 1.8 Mt decline. The biggest downside risk is if hydro generation recovers on wetter-than-normal conditions. For 2018, we see another drop of 1.9 Mt from the main importers, slightly down from the 2.0 Mt y/y drop expected last month.