Chile considers natural gas exports to Argentina

Oct 22, 2007 02:00 AM

Chile is considering exporting natural gas to Argentina, state oil company Enap CEO Enrique Davila said during a roundtable discussion with industry leaders in Santiago.
While Chile has traditionally depended on Argentina for natural gas imports, Argentina has virtually halted exports to its westerly neighbour, causing the latter country increasingly to rely on diesel imports to fuel power generation. An LNG plant being built in the central Chilean port of Quintero by Enap and the UK's BG, however, is expected to open in 2009 and will have maximum capacity of 18 mm cmpd, according to Davila.

Supply contracts for 6.5 mm cmpd have already been signed for 20 years.
"We could export gas in 2009 or 2010 if they [Argentina] could guarantee us gas exports until then," Davila said, adding Enap was looking at building a natural gas pipeline from the plant to the south of Chile. An additional LNG plant is being constructed in the northern port of Mejillones by Chile's state copper producer Codelcoand multinational energy company Suez Energy International (SEI). The various options would allow for continued use of the two natural gas pipelines that connect the two countries.

Large-scale natural gas imports by Chile from Argentina are not expected to resume to Chile, according to various speakers at an energy integration conference in Santiago. Argentina, meanwhile, will soon become a net importer of energy, according to independent energy consultant Daniel Gerold.
The country is seeing its natural gas reserves decline and strict government price controls are causing new investment to dry up. While Argentina has looked to Bolivia for new sources of gas, Bolivia's production has not increased despite high prices and the country cannot be counted on as a reliable supplier of natural gas to Argentina, Gerold said.

Brazil will receive most of Bolivia's exports, CERA energy consultant Sophie Aldebert told the conference.
"Intra-regional exports are going to stabilize and most will go to Brazil," Aldebert said. While various LNG plants have been touted for Argentina, most notably in coordination with Venezuela's state oil company PdVSA, only Chile and Brazil are capable of paying the higher cost of LNG imports," according to Aldebert.
"Argentina is in no condition to buy LNG," she said.

While Chile looks to LNG as a solution to its natural gas supply problems, many industry analysts are worried the country will be forced to depend on a fuel whose price is unstable. LNG prices are increasingly linked to those of crude oil on world markets, but LNG suppliers will keep the price of the fuel between $ 5 and $ 7/mm Btu, Davila said.
"LNG is currently around $ 6/mm Btu and dropping," Davila said. "New reserves of natural gas around the world are coming online and new liquefaction plants are being constructed," he added. "They're not putting all new trains online, however, because they want to keep the price at $ 5, 6 or 7."

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