MercoPress. South Atlantic News Agency

Gas cuts hit Punta Arenas main industry

Chile' Energy Commission reported this Sunday that Argentina notified of further cuts in the supply of natural gas which will now affect the extreme south of the country Magallanes Region, and central Chile mostly in Santiago.

Magallanes Region will experience a one million cubic meters per day cut which is very significant since most of the supply is consumed by Methanex, the world's main producer of methanol. Without natural gas the plant a few miles away from Punta Arenas can't operate.

Santiago region, will receive 1,7 million cubic meters less per day affecting one of the main electricity generating companies, Electrica Santiago and Metrogas the main residential and industrial distributor.

However Metrogas in an official release said the effects will be minimal since the company has "other suppliers".

The new restrictions added to those already implemented total a daily cut of 8,4 million cubic meters per day, the highest since the crisis began. The reduction is equivalent to 33% of Argentina's gas supply to Chile and 40% if only the centre and north of the country are considered.

In Punta Arenas the Chilean government oil company ENAP reported that the million cubic meters less of natural gas was being "re-directed" to Buenos Aires through the San Martín pipeline.

"We don't know when this will be over; the additional gas it to be injected in the San Martin pipeline and sent to Buenos Aires, and I'm afraid this could worsen depending on the available capacity of that pipeline", said Danilo Martic Enap's Exploration and Production Manager.

However Mr. Martic emphasized that the 750,000 cubic meters daily consumption of Punta Arenas during winter months is ensured with local production.

ENAP CEO Daniel Fernández is expected this Monday in Punta Areas for a personal assessment of the situation.

Argentina supplies 55% of the natural gas consumed by Methanex.

Punta Arenas press reports that Methanex top managers left for Buenos Aires and would not be making any comments on the situation until they return.

But the whole methanol project, including a fourth block expansion, could now face serious challenges.

When the US-Canadian corporation chose Punta Arenas it was taking advantage of the abundance of natural gas in the Austral basin; however the recent Argentine government decision to build a second pipeline from Tierra del Fuego to Buenos Aires supplying 2,8 million cubic meters per day by 2005 and 8 million by 2006, Magallanes the "natural" market, will be relegated.

"This together with the fact Argentina has ignored legal binding contracts creates a horizon of uncertainty", indicated reliable ENAP sources.

The new 3,300 kilometres natural gas pipeline to Buenos Aires has been contracted to Brazilian Petrobras.