CHILE: BRITISH GAS WINS BID TO BUILD

UNCLAS SANTIAGO 000431 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ENRG PREL CI SUBJECT: CHILE: BRITISH GAS WINS BID TO BUILD RE-GASIFICATION PLANT REF: 05 SANTIAGO 00631 ¶1. (U) Summary: British Gas (BG) beat out other international competitors to secure a USD 400 million contract to build a liquid natural gas (LNG) facility on Chile's central coast at Quintero. Chile's state-owned oil company ENAP hopes this mega-project will reduce Chile's dependence on Argentine sources of natural gas and ensure sufficient electricity production for future needs. End Summary. ¶2. (U) On February 23, ENAP announced that BG had won a preliminary contract to build a port terminal and re-gasification plant on Chile's central coast (Region V). BG's proposal beat out bids from the French/Belgium Suez Energy Company, British Petroleum, Australia's Woodside Energy and Spain's Repsol-YPF firm. ENAP officials stated that BG was chosen for its expertise in natural gas and experience in South America. BG has a controlling interest in Brazil's largest gas distributor, Comgas. It also owns 45 percent of Metrogas in Argentina, and significant natural gas reserves in Bolivia. ¶3. (U) The Chilean facility is scheduled to begin operations in 2009. The re-gasification plant will have a maximum capacity of 15 million cubic meters per day, as well as storage facilities. It will begin operations at a rate of 5 million cubic meters per day, which would satisfy 25 percent of Chile's projected natural gas demand. This amount of LNG will be sufficient to supply electrical power generation plants throughout Chile. ¶4. (SBU) Argentina has historically been Chile's largest supplier of natural gas, with commercial agreements dating back more than a decade. However, insufficient production in the last two years has forced Argentine suppliers to reduce exports to Chile in order to satisfy domestic Argentine demand. When the cuts occurred for a second year in a row (reftel),the Lagos administration ordered ENAP to explore ways to diversify Chile's gas supplies. With the new port facilities, Chile will be able to receive gas from a variety of international sources, reducing its dependence on Argentina. KELLY