MercoPress. South Atlantic News Agency

Energy-shortage winter ahead in Southern Cone.

Chilean National Energy Commission reported that the natural gas supply shortage during March 2005 was equivalent to May 2004, the worst month of last year with an average drop of 30,4% equivalent to 7,2 million cubic metres less of gas per day.

The report indicates that the worst cut in natural gas supply from Argentina was last March 20 with a contraction of 9 million cubic metres that is 39% of total supply.

In 2004 the largest volume fall occurred May 31 when Argentina failed to pump 10 million cubic metres of natural gas, equivalent to 45% of total supply.

On average that month's supply shortage was 30,7%, just three tenths above the March 2004 figure.

The Chilean government and private sector are nervous about supply prospects and its impact for residents and industry since cuts are expected to increase in the coming months of May and June.

Currently shortages are affecting 85% of industries in Santiago's metropolitan region.

Last week Metrogas the only natural gas distributor in Santiago said it ceased receiving 68% of the normal contracted gas supply from Argentina.

Argentina supplies almost 90% of Chile's natural gas demand but last winter President Kirchner's administration decided to favour domestic demand, forcing Chile to face a serious shortage which also strained relations between neighbouring countries.

This year the situation could be even worse since the overall Southern Cone is suffering from insufficient rainfall, and the south of Brazil, Uruguay plus certain areas of Argentina which depend on hydroelectricity are having significant production shortages and have announced programs to save energy.

Furthermore electricity generating plants that work with gas have warned that if in the coming six weeks drought conditions persist, their supply will be even scarcer forcing strict rationing of available energy.

To make things even more volatile, Argentine Planning Minister and close advisor of President Kirchner, Julio de Vido has repeated to the Argentine Industrial Confederation that if this coming winter the country faces natural gas shortages, "the adjustment variable will be the surplus gas production exported to Chile".

Actually the current limited natural gas supply suffered by Chile, Uruguay and south Brazil is partly a consequence of the ongoing dispute between the Argentine government and the public utility companies which are demanding an increase in rates (frozen since 2002), while the Kirchner administration insists in demanding more investments from these companies or reviewing existent contracts.

The Kirchner administration claims that since public utilities were privatized in Argentina during the nineties foreign companies (mainly Spanish, Italian and French) have made "fortunes" and not kept their part of the bargain regarding investments, but it admits this is partly because of "insufficient government controls".

On the other hand privatized public utility companies in Argentina have contracted investments in new sources and plants arguing that they are no longer profitable.

A possible option to overcome the situation is Bolivia in the heartland of South America which has abundance of natural gas and pipelines connecting with Argentina.

But Bolivia is in the midst of political turmoil involving hydrocarbons legislation and since it has a pending sea access dispute with Chile dating back to 1879 it demands assurances from Argentina that no Bolivian gas will end in Chile.

Cold winter ahead...