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Enarsa to lease LNG terminal from May

March 6, 2009

SAEM – Argentine state-owned energy company Enarsa confirmed that it will lease from May from Texas-based Excelerate Energy an LNG floating terminal that will be docked at Ingeniero White, located next door to Bahía Blanca, where the country’s most important petrochemical hub is located.

Last year, Enarsa leased the LNG terminal from the same company, which can supply up to 500MMcf/d, at a cost of about $17/MMBtu. “Taking into account that energy prices have fallen sharply from last year’s highs, we expect that the cost of the LNG terminal could be about half from last year,” said an Enarsa official. “Leasing costs are unchanged but energy prices are much lower than before.”

The Enarsa official said that he was not certain for how long the LNG terminal would be leased. “It all depends on demand and the weather,” he said. “There is a fertilizer plant in Bahia Blanca and demand hinges on their [output] plans as well.”

Despite a sharp slowdown in economic growth in 2009 after expanding at about 9% annual rates, analysts such as Jorge Lapeña, president of non-profit NGO Insituto Argentino de la Energía “General Mosconi” (IAE), told South American Energy Markets recently that gas output would continue to fall in 2009 by 1% while demand would rise.

Gas consumption rose last year by 0.38% to 386.792Bcm compared with 385.311Bcm in 2007, according to Argentine gas regulator Enargas.

Lapeña said that a worrying trend in Argentine gas production was seen in December, when output retreated by 4% 4.077 billion cubic meters despite a sharp fall in economic growth.

Another factor that has encouraged Argentina to lease an LNG terminal is uncertainty over gas imports from Bolivia due to political and regulatory confusion in the landlocked country.

Owing to the fact that household consume the most gas in Argentina during the Southern Hemisphere winter months, the government was forced to ration gas in 2007 to industry in order to plug consumption by families that heat their homes, which consume well over 30% when in other months it is on average about 12% of total consumption. During May-September, gas consumption in 2008 stood at 17.1Bcm, 1.7% less from 17.4Bcm in the previous year.

(The article can be reprinted as long as permission is requested from etessieri@latamreport.com and the source is mentioned)

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