Chile Lawmakers Promote Wind, Water Energy to Ease Gas Shortage

Chilean lawmakers will seek to create incentives for investment in wind, coal and water power after Argentina, the supplier for almost all Chile’s natural gas, cut shipments by more than half, two senators said.

The natural gas shortfall threatens to slow economic growth in Chile, the world’s biggest copper producer, said Bertrand Delgado, an economist with IDEAGlobal Inc. in New York. Industrial production in April rose at the slowest pace since August 2003, in part because producers had to turn to more expensive alternative fuels like diesel. The country’s Mining Council said June 15 that the rise in energy costs this year is likely to outpace last year’s 12 percent increase. Energy accounts for 10 percent of mining expenses.
Should gas supplies tighten further, the mining industry’s power grid in northern Chile may face shortages at a time prices of copper are near a record, Jaime Orpis, president of the senate energy and mining committee, said.

Natural gas-fired plants accounted for about 61 percent of electricity generation in the northern power grid in 2005, said Brian Chase, an analyst at Celfin who follows Empresa Nacional de Electricidad SA, Chile’s biggest power generator. Nationwide, about a third of all generation capacity runs on natural gas.

Argentina increased restrictions on gas sales to Chile over the past six weeks to supply its own growing demand. The economy expanded more than 8 percent annually for the past three years, recovering from a debt default and devaluation in 2001. In the same period, Argentine production stagnated as companies such as Repsol YPF SA and Total SA reined in investment after the government froze utility rates.

Bloomberg