Indicative data for June show Latin American LNG imports expanding by 0.40 Mt y/y to 2.04 Mt. Half of this growth was accounted for by the Dominican Republic, which imported 0.2 Mt more y/y. Of the major importers, Mexico posted the largest gains, taking 0.14 Mt more y/y on some domestic pipeline constraints driven by growing gas demand in the north. Chile took 0.04 Mt more y/y, while Argentina imported 0.07 Mt less y/y. During June, Chile started exporting pipeline gas to Argentina, reportedly sourced from its Quintero LNG terminal, which will support further imports of LNG into Chile.
Gas production continues to climb in the region, with total Brazilian production increasing by 0.15 bcm y/y and year-to-date Chilean production (Jan–May) hitting 0.52 bcm, the strongest value for the first five months of the year since 2013. June data were not yet available for Argentina, but over the last few months domestic production growth has shown signs of weakening. This slowdown is likely to be temporary, however, as YPF announced a $1.2 billion investment to increase shale gas production through 2021, complementing the $3.2 billion already committed earlier this year. That said, it will take some time for those investments to filter through into the production of marketable gas.
In terms of power generation, renewables, particularly wind, continue to offset the losses in hydro generation (due to persistently low reservoir levels) while also reducing the need for thermal generation. In the Chilean power mix, June saw gas log its first y/y decline since July 2016, while wind generation was 0.17 TWh higher y/y. Brazil’s hydro and thermal generation were 0.2 TWh and 0.1 TWh lower y/y, respectively, while wind generation blew in at 0.6 TWh higher y/y.
There remains little in the regional fundamentals that is bullish for LNG markets. There is very little in terms of strong climatic indications for the coming three months, although we will now start moving into the shoulder months and out of peak winter. The outlook for regional production still seems to be overwhelmingly positive, with both Brazilian pre-salt and Argentinian shale likely to deliver good gas volumes in the coming years. From the big four importers, we are forecasting a 1.3 Mt y/y reduction in LNG imports across 2017 and a y/y fall of 1.9 Mt in 2018. As we have seen in last month’s data, some of the other, smaller importers can increase to the upside, and those nations will be worth watching in the coming months to see if such growth can be sustained.