MercoPress. South Atlantic News Agency

Magallanes economy hit by Argentina's gas restrictions

Argentina privileges his domestic consumption

Argentina's erratic supply of natural gas had a direct impact on the Magallanes Region economy according to the latest official release from the Chilean Statistics Office.

The Regional Economic Activity Index dropped 3.6 percentage points during the first quarter of this year compared to the same period a year ago because of the considerable cuts in natural gas supply to Magallanes huge methanol industry established in the vicinity of Punta Arenas. If methanol production is excluded, the regional economic activity index actually shows a positive gain of 3.6%. Comparing the first quarters of 2006 and 2007, construction, retail, transport, storage and communications experienced a strong advance while manufacturing, (mainly because of methanol production), forestry, mining, agriculture and fisheries, contracted or remained unchanged. The Magallanes region Statistics Institute Deputy Director Patricia Burgos, recalled that the problems faced by Methanex because of a considerable reduction in the volume and regularity of Argentine natural gas supply have already had an impact in the previous quarter (Oct./Dec). The 2006 fourth quarter economic activity index actually recorded a negative reading of 5.6 percentage points compared to the same period in 2005. Meantime in Santiago the Nacional Energy Committee confirmed that the supply of natural gas from Argentina for the second week running is under significant strain. In the north of Chile electricity generating plants, (vital for refining copper, the country's main export) have been forced to use alternative diesel oil which increases operating costs. In metropolitan Santiago manufacturing industries have had to limit production but according to Energy Minister Marcelo Tokman "restrictions have not affected supply to residential consumers". Chile, under contract, is supposed to receive 22 million cubic meters per day of natural gas but Argentina, --with a booming economy and frozen rates--, privileges domestic consumption which means severe restrictions for neighboring Chile. According to the National Energy Committee, the electricity generating plants in the north of Chile, in less than five months, so far have registered 60 days with no natural gas provision from Argentina.