MercoPress. South Atlantic News Agency

Argentina doubles price of gas pumped to Chile

The Argentine natural gas pumped to Chile costs as of Saturday July 15 almost 100% dearer according to official sources in Buenos Aires, quoted by Clarin. The average price Chile has to pay is now between 3.2 and 3.4 US dollars per million BTU.

This Saturday also became effective the price increase for Bolivian natural gas reached after long negotiations between the administrations of President Nestor Kirchner and President Evo Morales, which ensures Argentina a daily provision of 7.7 million cubic metres but at 5 US dollars per million BTU instead of the previous 3.20 US dollars.

President Nestor Kirchner's administration criteria has been to "saddle on" to Argentine gas exports to Chile, Uruguay and Brazil the higher price paid for the Bolivian fuel. Chile currently imports 15 million cubic metres per day of Argentine gas, Uruguay half a million and Brazil none.

Argentina's Planning Minister Julio De Vido had anticipated that Argentina would transfer to Chile "the exact incidence" of the Bolivian imported gas price increase. "Fees will be charged equivalent to the exact incidence that the five million cubic metres of Bolivian gas at 5 US dollars per million BTU have for Argentina", underlined De Vido during a public works inauguration.

Chilean authorities were expecting that following on Argentina's intention of passing on the price difference paid to Bolivia on to its own customers, the price of natural would increase from the range of 1.2 to 1.8 US dollars to 2.4 to 2.7 US dollars.

"However, on working with the new numbers, taking into account taxes and the 1% commission for Argentina's Energy company, Enarsa, --which is not going to work at a loss--, meant that the real price was between 3.2 and 3.4 US dollars per million BTU" admitted Chilean sources. The higher prices will be implemented by additional fees to be charged to the Argentine gas pumped to Chile.

This new scenario will put more pressure on Michelle Bachelet's administration which during the last few days had contacted Chilean distributors and electricity generating plants with the purpose of convincing them to absorb the price differences thus moderating the impact on consumers. But the talks were based on the more moderate increase estimate.

Chilean sources confirmed that President Bachelet has requested an interview with President Kirchner during next week's Mercosur summit in Cordoba to consider the issue. Argentina's energy "czar" Julio De Vido has postponed a trip to France to be present at the bilateral meeting.

Mr. De Vido further revealed that the gas transactions between Argentina and Bolivia will now be between governments owned energy companies with no participation of the private sector, as until now.

Meantime in Chile Mining and Energy Minister Karen Poniachik held an urgent meeting with Congress members of the ruling coalition to analyze an Energy Security Plan "to address the challenges facing the country".

"We're launching an ambitious but realistic energy security program with short and medium term actions which will help the country achieve greater diversification, greater autonomy and an improved efficiency and intelligence in the use of resources", said Poniachik.

Senator Sergio Bitar praised the plan saying ir includes decisions and projects which will ensure that Chile "won't be exposed again to ups and downs" in supply and prices.

Among the projects for the energy security plan Senator Bitar mentioned back up turbines, the half a billion US dollars liquid gas re-gasification plant plus 89 thermal and hydroelectric solutions totalling 12 million MW, "and we suggested that the nuclear energy option must also be considered, it's time Chile begins assessing this option".

In what was interpreted as a first reaction to the controversy with Argentina, the Chilean government decided to cancel sine die the binational Trans Andes central railway project which was to begin the bidding process at the end of July. In a short release Chile's Public Works Department alleged "technical reasons" for the suspension of the joint project which has an estimated cost of 256 million US dollars. Apparently President Kirchner is particularly interested in expanding the railway system.