Spain's Repsol may halt the delivery of nine ships carrying LNG to Argentina in retaliation for the South American government's pending nationalization of its YPF unit, a source in the energy sector said.
The cancellation of the shipments, which is still being studied, could cause shortages in Argentina where the government relies heavily on imports because local gas and oil production has slumped on price controls that critics say discourage investment.
Repsol suspended the first of 10 planned LNG shipments several days ago, citing concerns that Argentina's state energy company Enarsa, which manages imports, might lack financial payment guarantees.
"The chance that all shipments will be cancelled is high. Repsol is studying whether to cancel these sales. It's a response to the nationalization of YPF," the source, who spoke on condition of anonymity, said.
Argentina's Congress could approve a bill this week that is strongly backed by President Cristina Fernandez and would allow the government to seize 51 percent of oil company YPF, currently in the hands of Repsol.
Fernandez, whose interventionist policies irritate investors but who is supported by most Argentines, has accused Repsol of not investing enough in new exploration by YPF and paying overly generous dividends.
YPF said on Saturday it was certain Repsol would cancel the LNG shipments. No one from Repsol was available to comment.
A halt in the shipments would force Argentina to pay higher prices for LNG from other suppliers, putting added pressure on the country's trade surplus, which has been narrowed by energy imports that reached $10 billion last year.
Even with imports, cuts in supplies are routine during winter months to guarantee cooking gas for homes. Those cuts have hurt local industry.
Enarsa had planned to buy a record 80 shipments of LNG this year to cover 20-30 percent of domestic consumption. But through February it had only linked up 51 shipments because high prices made it reluctant to sign contracts, according to analysts.
It had booked those purchases at prices of $13.5-$14 per million British thermal units (mmBtu). But prices have since risen.
"It's a serious setback," said energy analyst Eduardo Fernandez in reference to rising international prices.
A recent cargo was delivered to Argentina by Excelerate Energy for more than $16 per mmBtu.
Enarsa is currently receiving offers of between $16-$20 per mmBtu. It then makes the fuel available on the local market for about $4 per mmBtu. The state finances the difference.