As temperatures in Argentina get colder than Antarctica, energy demand rises

By Rodrigo Orihuela
(c) 2010 Bloomberg News
Tuesday, August 3, 2010; 12:00 AM

Aug. 3 (Bloomberg) -- Argentina is importing record amounts of energy as the coldest winter in 40 years drives up demand and causes natural-gas shortages, prompting Dow Chemical Co. and steelmaker Siderar SAIC to scale back production.

Electricity supplied from Brazil and Paraguay rose to a daily combined record of about 1,000 megawatts on July 12, while consumption peaked at 20,396 megawatts three days later, according to Buenos Aires-based energy broker Cammesa. Shipments of liquefied natural gas are set to double this year.

Dow, Siderar and aluminum maker Aluar Aluminio Argentino SAIC are among companies closing plants, cutting output or seeking alternative energy sources after temperatures in parts of Argentina fell below those of Antarctica on July 15. Rising demand is exacerbating a shortage that began six years ago as economic growth accelerated and energy investment fell. The shortage is boosting costs as companies spend more to guarantee supplies.

"The situation is getting worse, because the shortage period is growing every year," Gerardo Rabinovich, a director at the General Mosconi Energy Institute in Buenos Aires and an adviser to the opposition Radical Party, said in a telephone interview. "When this started in 2004, it lasted for about a week, then it was two weeks and now it's more than a month."

In July, temperatures in Buenos Aires were, on average, 1 degree Celsius below the usual low and high of 8 and 14 degrees (46 and 57 degrees Farenheit), with temperatures plummeting to about 2 degrees Celsius on July 15.

Also on July 15, temperatures in Mendoza, the wine- producing region in western Argentina, fell as low as -8.9 degrees Celsius below the temperature registered that day in the Argentine-controlled area of the South Pole, according to a national weather institute report.

Argentina is bracing for a renewed polar front this month. On Aug. 1, almost half of the country's 23 provinces registered temperatures below zero, while the northern city of La Quiaca on the border with Bolivia fell to minus 10 degrees Celsius (14 degrees Fahrenheit.) The average low predicated through Aug. 5 is 1 degree, according to the National Weather service.

Dow closed a polyethylene plant in July and reduced operations at another facility to minimum capacity after gas supplies were rationed by the government, said Soledad Echague, a spokeswoman for the Midland, Michigan-based company in Buenos Aires. The cuts were more severe than the company had expected, she said.

"The situation should be under control, as long as the weather improves," Horacio Mizrahi, a spokesman at Argentina's Planning Ministry, which oversees the country's energy policy, said in a July 27 telephone interview from Buenos Aires.

Aluar needs a constant supply of electricity at its 410,000 ton-per-year aluminum smelter in Argentina's southern Chubut province. The company is buying power to keep the plant running during peak gas consumption hours this winter, a spokesman for the Buenos Aires-based company, who declined to be named under company policy, said in a July 26 telephone interview.

Siderar reduced production to a minimum during peak gas consumption hours in July, according to a company spokesman, who declined to be named, citing company policy.

Argentina has doubled purchases of LNG shipments to 14 this year to address the shortages. Each shipment equals 3 million British thermal units of the fuel. Seven ships were bought last year, according to government data compiled by the Argentine Oil and Gas Institute, an industry research group.

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