Golar LNG Ltd. has inked an agreement with oil and natural gas producer Pan American Energy S.L. (PAE) to begin exporting liquefied natural gas from Argentina for 20 years starting in 2027.
Under the agreement, Golar would deploy a 2.45 million metric tons/year (mmty) floating LNG (FLNG) vessel to the Argentine coast, “establishing Argentina as an LNG exporter,” the firm said.
Plans are to liquefy and export natural gas sourced from the Vaca Muerta shale play in Argentina’s Neuquén Basin. Golar touted Vaca Muerta as the world’s second largest shale gas resource.
PAE is an integrated energy company focused on Latin America with interests across the entire hydrocarbon value chain. The company was Argentina’s fourth leading natural gas producer in May, according to government figures.
The FLNG project “will provide an international outlet for Argentina’s vast and attractive natural gas reserves, creating value to Argentina and its gas stakeholders,” said Golar CEO Karl Fredrik Staubo. “The project expands Golar’s global footprint, with further growth potential.”
The agreement entails a gas sales agreement from PAE for the supply of gas and an FLNG charter agreement with Golar including “a base tariff and commodity exposure to LNG sales prices,” according to management of Hamilton, Bermuda-based Golar.
The plan is to utilize Golar’s FLNG Hilli vessel, “providing an equivalent net tariff of $2.60/MMBtu (based on 90% capacity utilization) with an additional commodity-linked pricing element,” Golar management said. “Golar has flexibility to consider a swap alternative for another suitable Golar FLNG unit.”
The firm added that, “As part of the agreements, Golar will hold a 10% stake in Southern Energy S.A., a dedicated joint venture with PAE, responsible for the purchase of domestic natural gas, operations, and sale and marketing of LNG volumes from Argentina.
“This initiative is envisaged to be the first phase of a potential multi-vessel project and it is anticipated that other large natural gas producers in Argentina will join.”
Reversing Flows
Argentina is pursuing LNG exports as a way to capitalize on its vast unconventional gas resources. The new CEO of 51% state-owned oil and gas company YPF SA said earlier this year that the firm is seeking to sanction a large-scale liquefaction project by mid-2025.
Currently, Argentina imports LNG in the winter months to meet demand, although this trade is diminishing.
Argentina imported 0.35 mmt of natural gas through June this year, compared with 0.72 mmt through June of last year. More than 75% of 2023 volumes originated in the United States, according to Kpler data.
A global LNG supply glut could be around the corner, however, with a flood of new export capacity slated to enter service in the coming years.
The worldwide LNG market grew by 2.1% in 2023 versus 2022, with China leading the growth in net imports, according to the International Gas Union. Latin America’s net imports rose to 9.42 mmt from 8.85 mmt, with increased imports in Colombia offsetting a decline in Brazil.
“We continue to advance additional FLNG developments and see increased prospective client interaction for our FLNG offering,” Golar said in its first quarter earnings report. “Geographically, most of the activity remains in West Africa and South America, however we are pleased to see other regions with proven stranded and associated gas reserves seek FLNG development.”
