MercoPress. South Atlantic News Agency

Argentina guarantees Chile 10% gas supply for this winter

Argentina has guaranteed the supply of natural gas for residential consumption in the coming winter announced Chile's Energy Minister Marcelo Tokman following a meeting in Venezuela with Argentina's energy czar Julio De Vido.

The meeting was originally scheduled to be held in the coming weeks in Buenos Aires but the two officials took advantage of their presence at the first South America Energy Summit which took place this week in the island of Margarita and convened all the continent's leaders with the exception of Uruguay and Peru. However several points remain unaddressed in the agenda: extent of supply cuts for industry and power generating plants, plus the renewal of gas export contract for Metrogas which is a main supplier of metropolitan Santiago. Chile has contracts signed with Argentina dating back to the nineties establishing a daily supply of up to 22 million cubic meters of Argentine natural gas, but only 2 million are earmarked for residential and commercial clients. The volume makes Chile almost 80% Argentina dependent for its supply of natural gas a fuel which has been strongly promoted by Chilean authorities to help combat the ever increasing pollution in metropolitan Santiago. For several years now, particularly since President Nestor Kirchner took office, Argentina has privileged domestic demand over exports in peak consumption winter months, leaving Chilean manufacturing industries and power plants with virtually no gas thus forcing to close down factories and convert plants to expensive double fuel cycle. Chile has always supported regional energy integration but has repeatedly warned that no advance is possible without respect for agreements, clear rules, reliable partners and honoring contracts. However in Chile Minister Tokman's announcement had a mixed reaction. Francisco Aguirre from Electroconsultores, an energy advisory group, called it "trivial" since the announcement refers to "a mere 10% of total Chilean gas imports" and if this is not available and guaranteed, "â€Ã‚¦we don't exist as a country". However former Economy and Energy minister Jorge Rodriguez Grossi is quoted saying that "it's most important to know beforehand that residential supply will be available next winter". "It reasserts the commitment of the Argentine government and this is positive in itself", added Rodriguez. Chile is currently building a huge plant in the north of the country for the processing of liquid natural gas which should be functioning sometime in late 2008, early 2009. When this happens Chile will rapidly become less Argentina dependent diversifying suppliers through the spot market since it will have the equipment to reprocess natural gas for its power plants which generate the much needed electricity for smelting copper, the country's main export. Argentina has a declining supply of gas because a prices' freeze policy has severely limited new investment and production, and the four years running strong economic recovery is rapidly absorbing most reserves.