Overview
Chile is a major consumer of gas in Latin America, but a minor producer, making it heavily reliant on imports. Argentina traditionally supplied Chile with gas, but expanding domestic demand meant exports had declined from a high of 7.8 billion cubic metres in 2004 to just 1 bcm in 2008 – and had stopped entirely by 2012 – according to the Energy Information Administration.
Chile was entirely reliant on Argentina for its gas supply until 2009, meaning as exports from Argentina fell Chile had no alternative source of the fuel. The country was forced to reduce consumption as domestically produced gas met only a quarter of demand in 2005.
A substitute for gas was found in ‘LPG aire’ a mixture of LPG and air, which simulates the characteristics of natural gas. Two million barrels of LPG were been consumed between 2004 and 2011 to meet shortfalls in gas supply.
Chile’s northern neighbours, Bolivia and Peru, are gas producers, but long-running border disputes – dating back to the 1879-1884 War of the Pacific – have prevented Chile from forming a trade partnership with them.
Chile has built two LNG terminals to improve energy security and increase gas use. The Quintero terminal started up in 2009 and supplies the cities of Valparaíso and Santiago in the middle of the country, while the Mejillones terminal started up a year later to meet demand from the mining companies operating in the north. Chile’s economy is heavily reliant on copper mining and extractive industries.
Chilean President Michelle Bachelet has promoted LNG as a fuel for power generation and her government’s seven-point plan for the country’s energy sector includes the construction of a third LNG terminal in the central-south region. The high cost of LNG will affect the amount of the fuel that can be imported; however, the prospect of nuclear restarts in Asia and new LNG plants coming online in the United States and Australia could lead to significant price reductions.
The HidroAysén hydroelectric project was cancelled by the Chilean government on the grounds of environmental damage to national parks and wetlands as well as to indigenous communities. HidroAysén would have generated 2.7 GW of cheap electricity, which will now need to come from other sources. Although gas will make up some of this, it is considered too expensive to cover it all.
Chile is expanding its unconventional gas production in the Arenal concession in Tierra del Fuego’s Magallanes Basin. There are 11 producing wells in Arenal and ENAP intends to bring four more onstream by August and drill 30 by 2015. Production volumes are low, but ENAP is planning to invest more into unconventionals and output could rise. The United States Energy Information Agency estimated the country had 1.39 trillion cubic metres of technically recoverable shale gas in June 2013.
Page updated: 25/07/2014