Three ships carrying liquefied natural gas are sitting in Argentine ports with nowhere to go, and each ship is costing the country $US15,000 a day.
According to Bloomberg, the country overestimated how much gas it would need during an unseasonably warm winter. Power consumption was down 3.6% this August compared to the same time last year. Lower manufacturing output has also reduced the need for energy.
Argentina is a huge importer of liquefied natural gas, but it lacks the storage facilities to hold this excess supply. The suppliers of this natural gas have refused to unload the cargo without full payment anyway after running into issues with that back in January.
More frustrating still, the country has its own vast supply of shale gas that has yet to be tapped — it’s called Vaca Muerta, and it’s the second largest supply in the world. Chevron and Argentina’s state run oil company YPF have been contracted to develop the Vaca Muerta, but it won’t be up and pumping for another five years.
In the meantime, each ship will continue to cost Argentina money — the first has been there since September 23rd, another since the 27th, and the last since the 30th.
This is just another confidence blow to investors, who’ve watched Argentina go from a country that showed signs of wanting to restore its creditworthiness in the international community, to one in default.
In July Argentina was declared in default when it refused to make a Court-ordered payment to a group of American hedge fund creditors.
Meanwhile, Central Bank reserves are incredibly low — at around $US27 billion. Imports are high, the price of Argentina’s commodity exports — like the soybean — have fallen off. Capital flight is rampant and Barclays estimates that by this time next year, the country could have as little as $US10 billion in the bank.
The President shrilly voiced her concern about all this last week, publicly blaming former Central Bank head Juan Carlos Fabrega for all this trouble.
“You blame me for the flight of capital and the rising dollar, that’s fine,” said Fernandez speaking to Fabrega in the front row of her public speech. “I feel for the dollar losses and not another one should leave the country. Besides that, you continue to have a problem with the economy that I don’t have to solve. Just be sure another dollar does not leave the country.”
Fabrega quit the next day. He was replaced by securities regulator Alejandro Vanoli, who is widely seen as an ally to Economy Minister, Axel Kicillof — an ideologue who was in favour of refusing to negotiate with the American hedge fund creditors. More of Kicillof’s men have been appointed to high level positions since then.
There were whispers in Argentine media that Kicillof was gaining power shortly after the default — now we’re seeing exactly what that means.