Argentina Rations Gas to Companies, Chile Amid Cold

Rolling blackouts and gas shortages in Argentina threaten more than four years of economic growth of over 8.5 percent per year. The ban on gas deliveries to Chile jeopardizes supply for an estimated 1.2 million residential users in eastern Santiago and may lead to increased energy costs for mining companies as power generators switch to more expensive diesel fuel.

“There’s no short-term solution to the shortage of gas,” energy consultant Francisco Mezzadri, the former head of natural gas operations at CMS Energy Corp., said in a phone interview. “Electricity prices have been frozen since 2002, a new pipeline from Bolivia has yet to be built and domestic gas reserves are declining. It’s a critical situation.”
Chile’s mining companies may face rising energy costs as generators try to pass on higher costs related to running power plants with diesel fuel, Senator Ricardo Nunez, chairman of the senate energy committee, said in a phone interview. Chile supplies 34 percent of the copper from mines worldwide.

“This could affect mining companies’ earnings significantly,” Nunez said.

Chilean Energy Minister Marcelo Tokman said the country has a backup plan to secure enough natural gas for homes should supply from neighboring Argentina run out.

“There would be normal gas supply for the bathroom and the kitchen,” Tokman said today in comments broadcast by Television Nacional. “We’re talking about a contingency plan for an eventuality that we don’t think is going to happen at this point.”

Bloomberg