MercoPress. South Atlantic News Agency

Argentina begins early cuts of gas supply to Chile

Chile's head of the Energy Committee warned that the industrial sector must be prepared to pay higher prices for fuel given the new set of cuts in natural gas supply from Argentina.

"We have to get used to the idea that energy costs are and will be dearer", said Luis Sanchez Castellon, forecasting that this coming winter the Argentine natural gas provision will undergo a similar situation to that experienced last year.

"We will have to learn to survive with these natural gas shortages for the next three years at least, which is the time we estimate it will take Chile to diversify its natural gas sources", he underlined.

Last week 235 small and medium sized industrial companies in Santiago were forced to paralyze activities totally or partially following greater cuts in the Argentine natural gas supply.

The supply cut equivalent to 700.000 cubic metres was caused by a greater demand particularly in Buenos Aires which underwent a heat wave.

Chile imports almost 90% of its natural gas, 22 million cubic metres per day, from Argentina.

Chilean industrialists complain that the surprise cuts not only cause havoc to the production line but increase considerably costs when forced to use alternative fuels.

However Mr. Castillon said that natural gas home supply was assured since it represents 10% of all the country's total import.

"But I insist we will have to learn to live with this situation until 2008/2009 when Chile manages to change its energy matrix", he emphasized.

Hector Castillo president of the Industrial Associations of Metropolitan Santiago warned that the ongoing situation will bring a reduction in investment and job losses, "so we're asking to cut down the uncertainty factor by letting us have an idea of a natural gas cuts timetable".

Last week Argentina also shut gas supply to neighbouring Uruguay.

Since taking office, Argentine President Nestor Kirchner has established that domestic consumption will be "privileged" over surplus exports, in spite of standing long term contracts signed in the nineties with Chile.