Chilean LNG project to be completed by 2007

May 06, 2004 02:00 AM

Chile will have a LNG system operational by 2007 to reduce its dependence on Argentina as its source of the fuel, Chilean President Ricardo Lagos said.
"Chile needs this project to import gas from distant countries with the ability to supply" LNG, he said. "As president, it's my obligation to take these measures now," he added. Lagos' term runs out in 2006.

The country currently relies solely on Argentina to provide natural gas and at the same time buys some 90 % of the gas exported by its troubled cross-Andean neighbour. However, as Argentina has shown a single source of gas is too risky, Chile must diversify its potential supplier base, Lagos said.
Argentina announced late March that it was rationing gas exports as it seeks to confront an energy crisis that threatens gas and power shortages this Summer Hemisphere winter. Chile buys 90 % of Argentina's gas exports and normally uses the fuel to generate around one-third of its electricity.

The restrictions have forced Chilean generators and manufacturers to use more expensive fuels, driving up energy costs in that country, but with only a marginal impact on the economy. Still, demand on both sides of the Andes is growing.
Plants currently under construction or soon to be built guarantee that Chile's power needs of some 400 additional MW annually will be filled through "a good part of 2008," with capacity of 886 MW due to go online this year, securing demand for 2005 and 2006, and 630 MW planned to carry the country's energy sector into 2008, Lagos said. The administration had earlier only said supply would be secure into 2007.

He reiterated that Chile was safe from fuel-induced blackouts through the use of other fuels such as oil on a day it was revealed that, for the first time since the issue arose, supply to the central grid supplying power to the overwhelming majority of Chile's people and industry had been affected by the supply cuts.
"The restrictions determined by Argentina are on a day-by-day basis, and vary in size. There were days in April during which they were some 2 mm cm, others of 6 mm cm, averaging out to 3 mm cm," a spokeswoman for Chile's national energy commission said. The LNG project will be led by state energy company Empresa Nacional del Petroleo, or Enap, which will seek private-sector bids to contribute to the $ 400 mm-$ 500 mm investment effort.

While earlier reports had said an LNG plant could be set as swiftly as in a few months and Indonesia during Lagos' visit offered Chile gas, the procedure will take time, Lagos said. While the planned capacity increases go online, a site for a liquefication plant needs to be chosen and ships need to be commissioned, he added.
"By 2007, Enap will need some 1.5 mm cmpd. It will form a consortium of major consumers to complete the project, assuring appropriate demand and financing," the president said.

To continue work on solving the supply problem in the short term, energy officials from Chile and Argentina are scheduled to negotiate in Buenos Aires.With the cutbacks, Argentina has reduced its gas exports to Chile to 5.25 mm cm or 25 % of normal deliveries from 15 %-20 %, with earlier fluctuations also occurring without public disclosure.
The issue has hurt normally close ties between the countries, and Chile is studying how to reduce its dependence on natural gas from Argentina in the medium term.

Source: Dow Jones
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