Argentina Cuts Natgas Exports by 2.3mcm/d to Chile

Argentina has cut natural gas exports to Chile by about 14%, or 2.3 million cubic meters a day (mcm/d), from April 1 in order to conserve gas reserves for domestic consumption, local newspapers reported.

The decision is in line with the government's Resolution 265/2004 published on March 25 that decreed gas exports must be restricted to give preference to domestic demand. The move is designed to reduce Argentina's current natural gas production deficit of about 5mcm/d, or 4.2%, of total gas consumption. The export cutbacks will affect generators in Chile's northern SING and central SIC grids, but SING generators will bear the brunt of the cuts.

The decision is "unilateral, arbitrary and unacceptable because it leaves us operating with one turbine, just 50% of our capacity," newspaper La Nación quoted SING generator and gas transporter GasAtacama's CEO Rudolf Araneda as saying on Wednesday. In the SING, GasAtacama's 781MW Central Atacama and AES Gener's 633MW TermoAndes combined cycle generators will receive about 1.6mcm/d of gas supplies less than normal, newspaper El Mercurio reported.

In the SIC, Endesa Chile's 243MW Taltal plant and Colbun's 372MW Nehuenco plant could be affected by cuts of 0.7mcm/d. The SING generators are more affected than the SIC generators because Argentina has more transport capacity to bring gas from the northwest to solve gas shortages in and around Buenos Aires than from the Neuquen basin, where transport capacity is restricted, Fitch analyst Carlos Diez told BNamericas.

Despite the gas supply restrictions, power distribution to consumers in the SING grid will not be rationed because the SING generators are equipped to burn coal or diesel fuel, energy and economy minister Jorge Rodríguez said.

However, burning coal or diesel fuel will increase generation costs for companies like GasAtacama and AES Gener, which are not permitted to pass the higher costs on to their clients.

The SING generators have not ruled out taking legal action against Argentina over the gas restrictions, which they say are in violation of their export contracts, GasAtacama's Araneda said. It is of "vital importance that the Chilean government makes sure the rights enshrined in these international agreements are respected," GasAtacama said in a statement.

Meanwhile, uncertainty over how Argentina's energy crisis will affect gas exports to Chile has caused a high level of volatility in the stocks of Chilean generators. "We still don't know who will be affected and how much - some will win and some will lose," Diez told BNamericas.

Thermoelectric generators that depend on gas could be the worst hit, but it depends on whether they have many contracts or not and whether they are able to use alternative fuels like coal or diesel, Diez said. "There's a lot of uncertainty in the sector."

Depending how much rain the central and southern part of Chile gets this winter, thermo generators in the SIC could buy power on the spot market from hydroelectric generators to make up for their own reduced output, Diez said.

Argentina's energy crisis stems from gas and electricity rates which have been frozen at their pesofied level since 2002. As a result of low gas prices, demand has soared while investment in gas exploration has ground to a halt, creating a widening gap between supply and demand. The government insists that gas producers must invest immediately to increase gas production but the producers continue to hold out for rates increases.

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