MercoPress. South Atlantic News Agency

Huge LNG plant ready to open in Chile and cut Argentine dependency

The Quintero project has included the installation of a sea terminal to receive LNG from tanker ships

Chile is just months away from beginning operations at a huge Liquid Natural Gas (LNG) re-gasification plant that was first planned during the Ricardo Lagos administration. The 1.1 billion US dollars plant is located near the Region V coastal city of Quintero.

LNG is natural gas that has been compressed to roughly 1/600th of its normal volume for the purposes of long-distance shipping. The Quintero plant, which can convert LNG back to its gaseous form, will allow Chile to import natural gas from major world suppliers in Russia and Asia.

Gasco, one of several partners in the venture, announced during a shareholder’s meeting this week that the Quintero plant will receive its first test shipment of LNG next month.

By June the facility will begin supplying natural gas to homes and businesses, said Gasco President Matías Pérez Cruz.

Gasco’s partners in the GNL Quintero S.A. entity include state oil company ENAP, British Gas and Italian-owned electricity giant Endesa.

The plant is being pegged as a solution to the country’s natural gas supply problems, which began five years ago when Argentina – Chile’s principal provider – began restricting exports. Chile relies heavily on natural gas not only for household purposes, but also for electricity production.

According to the National Energy Commission (CNE), Chile generates roughly 37% of its electricity (4,719 MW) with natural gas.

Backers of the project hope the Quintero plant will allow electricity generators to reduce diesel usage and thus save money. Replacing diesel with natural gas could also help reduce pollution in notoriously smoggy Santiago, observers predict.

“LNG that goes for electricity production will replace diesel,” said Marcelo Tokman, the government’s top energy official.

“The LNG that will start coming in during June and July won’t mean the complete replacement of diesel. But with the greater volumes (of LNG) that are expected for next year, diesel use will be reduced even more.”

Some analysts, however, suggest Chile should be cautious about how much it relies on LNG, demand for which is rising worldwide as local supplies of natural gas dry up. Increased global competition for LNG could mean price hikes that may ultimately offset the fuel’s comparative value advantage.

“In a country like Chile there is real concern about the stability of prices and the security of supply” Stephen Hall, an independent energy consultant, told the Santiago Times.

“The conventional view of the world is based on short term prospects, which treat the natural gas situation as quite optimistic. But in the medium and long term I think there’s concern about price and security of supply in Chile’s case.”

As an alternative, Chile would do well to invest more in renewable energy options, said Hall, who is based in Canada but has studied Chile’s energy situation closely.

“There’s no doubt that Chile is going to build about 1,200 MW of gas combined cycle plants, and most of that will be fired by LNG imported from Siberia. But it would be wise for Chile to try to limit its dependency on LNG by promoting renewable sources, for example by using solar water heating to replace natural gas water heating.” Santiago Times