MercoPress. South Atlantic News Agency

Chile adapting to higher prices for Argentine gas

Chile's Mines and Energy Minister Karen Poniachik confirmed the tax hike imposed by Argentina on natural gas exports to Chile which will now stand at 45%, meaning the final price of gas in the border has increased 72%.

However Ms Poniachik said her ministry had contacted Argentine authorities since some legal details of the new norm are "not too clear".

With the new tax, Argentine natural gas pumped to Chile which until now was costing between 2.5 and 2.8 US dollars per million BTU will now jump to 4.5 to 4.8 US dollars.

This follows Argentina's recent agreement with Bolivia which increased the price of natural gas pumped to Buenos Aires to 5 US dollars per million BTU.

According to Ms. Poniachik, Chilean distributor Metrogras has promised not to pass on to residential consumers the higher price with the company absorbing the difference.

"This cost hike in Argentine gas should not be reflected in price rates paid by Chilean residential consumers. We've spoken with Metrogas and there's a promise from the company not to bill the higher cost on residential clients which number 350.000", revealed the Chilean minister.

Chile faces a serious energy supply challenge since the natural gas provided from Argentina has significantly diminished in the last few years because of the growing demand of the Argentine domestic market and lesser reserves in the country.

Last year Argentina pumped an average 18 million cubic metres per day of natural gas but currently for the above reasons the volume has dropped to 12/15 million cubic metres. The contract with Argentina, signed in the nineties, contemplates a daily supply of up to 34 million cubic metres.

Chile's concern is not limited to higher prices but rather to a stable, reliable provision of gas which is essential for consumers and manufacturing industries in highly contaminated Santiago. Electricity from natural gas also plays a crucial role in the north of Chile where most of the copper mines are located.

In Santiago the Natural Gas Distributors Association chairman Carlos Cortés said a major effort will be undertaken not to bill the additional cost of gas to home consumers.

He added that the organization is not surprised with the new tax level imposed on Argentine gas, 45%, which proved to be above official forecasts of 35%.

"We were anticipating a higher tax, but we're not responsible for other people's or organizations' forecasts. We are simply going to pay the new price, there's nothing else we can do, just adapt to higher gas prices. Chile will have to learn to live with dearer energy prices", underlined Cortes.