The government intends to reduce energy subsidies this year by 0.6% of gross domestic product as part of the IMF staff-level agreement. The government also anticipated that in the agreement that the consequences of the invasion of Ukraine significantly increase the uncertainty surrounding the objectives of the program. Guzmán told reporters that although the increase in the prices of liquefied natural gas may translate into increases in electricity bills, it also increases the attractiveness of gas projects in the country.
The rise in gas after the start of the war between Russia and Ukraine puts pressure on energy subsidies. The increase in the price of energy (gas and oil) would negatively affect Argentina -which is a net importer- making the price of LNG, the liquefied natural gas that arrives in ships in the country, more expensive. Within this framework, the Ministry of Energy had calculated for this year an average price of LNG at US$25 per BTU, including the cost of regasification, which was far behind current prices.
The first objective to meet is the primary deficit of 2.5% by 2022. Although at first it does not seem to be so demanding, the truth is that the rise in energy prices affects a lot when thinking about a cut in subsidies at the same time that it will imply a greater disbursement of dollars by the Argentine government. It is worth remembering that Argentina is a net importer of gas since it does not have the necessary infrastructure or investment to achieve energy sovereignty.
The current price exhibited by gas is five times more expensive than the one paid last winter. According to official data, in 2021 the government purchased 56 LNG ships at a value of US$8.33 per million BTU. The evolution of the conflict estimates that at least US$8,500 will be needed to guarantee the same amount. The scenario of difficulties around gas hits the Argentine economy squarely, since 60% of the energy used is generated from LNG.
Source: Ambito
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