MercoPress. South Atlantic News Agency

Main issue in Bachelet/Kirchner summit: natural gas

A sustained provision of Argentine natural gas to Chile tops the bilateral agenda for Chilean president Michele Bachelet who on Tuesday will be travelling to Argentina for her first overseas official visit since taking office just over a week ago.

The task will be addressed by Mining and Energy Minister Karen Poniachik who is scheduled to meet the powerful Infrastructure minister Julio De Vido, advisor and close aide of Argentine President Nestor Kirchner.

"We will attempt to establish a natural gas supply horizon with the least cuts possible, plus a renewal of supply contracts", anticipated a member of Bachelet delegation.

In Buenos Aires Foreign Affairs minister Jorge Taiana recalled that natural gas is a "scarce resource" and what is needed is "the joint development of South America's energy sector and Argentina is intensely involved in several initiatives".

However he brushed aside the suggestion that Argentina had appealed to Bolivia and Venezuela to help with the supply of gas to Chile.

"We're not middle man for anybody", he remarked.

Almost 90% of Chile's natural gas consumption is supplied from Argentina but the Kirchner administration's policy has been to privilege domestic demand, meaning only the surplus, when enough, is pumped across the Andes.

This has caused great disruption in Chile's manufacturing sector and forced higher rates because of the use of alternative dearer fuels to generate electricity. In the long term Chile is planning to drastically cut Argentine dependency by establishing a liquid gas terminal and processing plant that should be operational in a couple of years.

But until then?Chile continues hostage of the Kirchner policy of privileging the domestic market but also of freezing energy and hydrocarbons prices which is rapidly devouring Argentina's proven gas reserves.

"Our energy situation is very bad", admits Ricardo di Dicco a researcher for the Argentine Idicso think tank specializing in energy matters. "I believe presidents Bachelet and Kirchner can work out a timetable of gradual cuts in natural gas supply from now until 2007, so home consumers are not affected", speculates di Dicco.

However he also points out that at the end of 2004 Argentina had proven reserves of 534 billion cubic metres of gas, but "consumption equivalent to 35 billion c.m. in 2005 plus a considerable drop (40%) in Repsol YPF reserves, probably another 30 billion less, are certainly not encouraging in the mid term". With an annual extraction of 52 billion cm, "the reserves horizon is limited to 8 years". "Beginning 2006 the gas supply to Chile will fall drastically until virtually disappearing by 2010 and 2011, at the latest", adds Mr. di Dicco

Another factor to consider is that some of Argentina's main operators such as Repsol-YPF, Panamerican Energy and Sipetrol (Chile) could be privileging the supply of natural gas to the giant methane plant, Methanex in Punta Arenas which was built on the certainty of a permanent supply of Argentine natural gas.

"The fact is that Argentine Customs and the Energy Secretariat don't monitor supply and work with statements from the same companies, which could be tempted to benefit by reporting lesser export volumes and under billing", claims di Dicco.

But whatever the circumstances, "President Kirchner, given the scarcity of natural gas, can be forecasted to act as he recently did with beef, privileging domestic demand".

President Bachelet, who will be flanked by various Chilean government ministers, is scheduled to leave Argentina and fly to Uruguay at 5pm tomorrow. Her stay in Uruguay is an "official" rather than a state visit as in Argentina's case.