Argentina expects to save $227 million for the remainder of 2012 and next year by increasing Bolivian natural gas purchases to replace a portion of its liquefied natural gas imports, the Planning Ministry said.

The country inked a deal with Bolivia Wednesday to increase gas imports by pipeline by 20% to 16.3 million cubic meters/d in the second half of the year, up from 13.6 million cu m/d in first-half 2012.

Imports will increase another 18% to 19.2 million cu m/d in 2013, with the aim of reaching 27.7 million cu m/d in 2017.

The increase in Bolivian imports will save money due to the price difference between Bolivian gas and LNG, the ministry said in a statement released late Wednesday. It did not provide actual prices.

But industry sources say Argentina pays about $10/MMBtu for Bolivian gas and $16/MMBtu for LNG.

The ministry said that the lower price of Bolivian gas saved Argentina $6.2 billion between 2007 and 2011 as a replacement for LNG.

Argentina began importing Bolivian gas in 2004 as its domestic production hit a plateau of 143.1 million cu m/d, not enough to meet peak demand in the colder months of May to September.

Argentina turned to the global LNG market in 2008, importing supplies to a floating terminal, after gas production began to slide -- it is now down 16% to 120 million cu m/d compared with 2004 -- and as Bolivian deliveries struggled to meet demand due to slower-than-expected expansion of its production.

Argentina now has two floating terminals in operation and this year imported the equivalent in send-out capacity of 9 million cu m/d in the warmer months of January to April before stepping them up to 20 million cu m/d in May.

Its purchases from Bolivia averaged 10 million cu m/d in the January-April period and hit 16.7 million cu m/d in May, according to Energy Secretariat data.

Story by Charles Newbery ; Edited by Chloe Cotoulas from Platts