Brazil must import record volume of LNG to deal with energy crisis

RIO DE JANEIRO, BRAZIL – Brazil’s imports of liquefied natural gas (LNG) are expected to hit a record high in September, data from Refinitiv and consultancy Kpler showed, at a time when U.S. cargoes usually destined for Europe are being diverted to help the Latin American country deal with energy shortages.

Brazil must import a record volume of LNG to deal with the energy crisis.

The worst drought in nearly a century in reservoir areas has affected generation from hydroelectric plants that typically supply almost two-thirds of Brazil’s electricity.

The country, as a result, has turned to gas from the U.S. to maintain its electricity load with the help of thermoelectric plants, and its LNG purchases have collaborated to drive global gas prices to record levels.

“Strong demand from Brazil means there is less LNG supply for European terminals,” said senior LNG analyst at consulting firm Kpler, Laura Page.

European gas storage has fallen to the lowest level in at least ten years, causing traders to compete fiercely for LNG ahead of the Northern Hemisphere winter season. Prices in Europe and Asia are at record levels.

JUMP IN IMPORTS

More than 80% of Brazil’s LNG deliveries this month will come from U.S. units in Louisiana and Texas, according to Refinitiv data. Overall, gas imports should reach 1 million tons by the end of the month, up nearly 20 percent from July’s record, Kpler estimated.

“The worst month (for demand) will be October,” said Rivaldo Moreira Neto, the head of Brazilian consulting firm Gas Energy to Exame newspaper. “I don’t expect any improvement in the next three to six months.”

In July, U.S. LNG purchases by Brazil and Argentina surpassed those of China, with the two countries taking 62.4 billion cubic feet (bcf) of gas, compared with 42.2 bcf from China, according to the U.S. Department of Energy data.

According to the department, a record 142 ships carrying the super-cooled fuel from the United States landed in Brazil in the six months ended July. Some were partially unloaded in Brazil and emptied their tanks in Argentina. Seventeen more cargoes are on their way.

STORAGE ADDED

New LNG terminals that will increase import capacity are beginning operation as Petrobras gives up its near-monopoly on natural gas in the country.

Last week, the operation of a gas-fired thermal plant with BP participation was authorized at one of the first private LNG terminals, running months ahead of schedule to avoid blackouts. “Until it rains, and we don’t know when it will, the price levels will cause desperation,” said one operator who buys cargoes for Brazil.