MercoPress. South Atlantic News Agency

Bolivia interested in selling gas to Chile

An unexpected player has appeared in Chile's market for gas. Neighboring Bolivia declared last week it is ready to export gas in exchange for a role in Chile's electricity market, according to local news media.

Bolivian government officials contacted Atacama and the Suez Group, two major electricity companies in northern Chile, offering to sell four million cubic meters of gas a day, which is more than double the gas imported from Argentina at the moment.

Although information is sparse, sources close to negotiations said that it could be a joint venture between the Bolivian state-owned electrical company YPFB and the Chilean corporations. If the deal goes through, it will have a value of US$800 million.

Chile's electricity sector is highly dependent on gas fuel. Producing electricity with diesel or coal fuel is 1200 percent more expensive.

Chile currently imports 72 percent of its energy in the form of petroleum, gas and carbon. "This dependency puts the country in a vulnerable position given the volatility of international prices and supply interruptions," said a report released in August by the National Energy Commission, CNE.

CNE is currently working on emergency plans for the nation's energy supply. It says significant shortages originally expected to begin in 2008 may begin as early as the first half of 2007.

Argentina has already announced a complete shutdown of natural gas supplies to Chile by 2010. This will make Chile more reliant on coal and hydroelectric energy unless alternatives are found. In the short term, coal and diesel fuel are expected to replace Chile's natural gas shortfall.

The demand for energy in Chile grows from six to eight percent every year. This amounts to a doubling of demand every ten years.

By Morten Szygenda The Santiago Times