Crunch time for South America’s gas supplies

Chile, which also produces more than a third of the world’s copper, is the vulnerable last link in a strained gas supply chain across a region where populist policies have held back the development of energy reserves.

The energy crisis is weighing on Chile’s growth forecasts as it seeks to secure membership of the Organisation for Economic Co-operation and Development. The economy is expected to grow 4.6 per cent this year, compared with 5.2 per cent last year. Maria Olivia Recart, Chile’s undersecretary for finance, this month said the gas restrictions could cut 0.5-1 per cent off the country’s gross domestic product.
Hector Castillo, head of Santiago’s Association of Industrialists, says some Chilean companies are shifting production to Peru or Argentina because of costs.

How to make South America’s dwindling supplies go round will be on the agenda when the presidents of Argentina, Brazil and Bolivia meet in Buenos Aires this weekend.

Chile, which relies on -fossil fuels for more than half its energy needs, imports all its gas from Argentina but Buenos Aires has slashed exports over the past year to meet soaring domestic demand spurred by subsidised electricity prices.

Scant supplies in both countries mean electricity generators have switched from gas to diesel, which is about three times more expensive. “Argentine gas is history,” says Juan Carlos Guajardo, executive director of Cesco, Chile’s copper industry think-tank. He fears a “very real risk of production problems” for Chilean copper this year as gas shortages are compounded by low rainfall, which will affect hydro-electric production, raising the prospect of power cuts.

Financial Times