BUENOS AIRES (Reuters) - Argentina's government, facing domestic gas shortages and targeted service cuts, said on Wednesday that it had unblocked the unloading of a key Petrobras gas shipment at port, which it added should stabilize the local supply issue.

Recent cold weather had already hit gas supplies in the South American country, but that sharpened when the gas shipment unloading was halted over payment issues, sparking shortages of compressed natural gas (CNG) at filling stations.

The energy secretariat said in a statement that state energy body Enarsa had bought a 44 million m3 CNG shipment from Petrobras on Friday that was meant to begin unloading today.

"But at the last minute the company challenged the letter of credit (payment) with which the fuel was to be paid and did not authorize the unloading of the LNG (liquefied natural gas) at the Escobar terminal," it said.

It added this had led to supply to non-priority users including industry, thermoelectric plants and filling stations being cut to protect hospitals, schools, homes and businesses.

"The objective is to continue supplying the 'priority demand' and residential homes," the government said, adding that the unblocking of the shipment should mean that "throughout the day the situation of supply cuts will be regularized."

Argentina is rapidly ramping up gas and oil production from its own huge Vaca Muerta shale region, but still relies on imports to meet winter demand. It wants longer-term to become a net energy exporter and globaly supplier of LNG.

(Reporting by Eliana Raszewski; Writing by Adam Jourdan)

By Eliana Raszewski