IEEE Power & Energy Magazine - November/December 2014 - 36

Another important element is that the region has
a long history of major hydroelectrical development,
coupled with the use of coal in thermal generation.
Unfortunately, the Chilean government and the electric
companies failed to anticipate the emerging critical conditions and were caught unprepared. The National Energy
Commission's indicative plan of April 2004 (formulated by
the regulator every six months), for example, foresaw the
building of seven combined-cycle natural gas plants in the
following ten years, all fed by pipelines from Argentina.
Major new hydro plants and interconnections with other systems were postponed until 2010 or later, as gas continued
to be seen as the major driver of expansion in a market with
demand growing by around 7% each year.
Bolivia holds significant natural gas resources and would
have been a natural alternative natural gas supplier; indeed,
it significantly increased its exports to Brazil and Argentina,
helping the latter cope with its crisis. But given its long history of border disputes with Chile (Bolivia lost its access to
the Pacific in a 19th-century war with Chile), Bolivia refused
to provide its next-door neighbor with natural gas, leaving
Chile with no regional alternatives for gas supply.
The government started looking into regulatory alternatives. Capacity payment regulations were modified to better
take into account an unreliable gas supply. A gas "drought"
concept was introduced, derating combined-cycle plants
that did not have alternative fuel arrangements and therefore reducing their capacity payments. Another alternative
that was considered but eventually dismissed was to limit
by law the country's dependence on foreign fuels to a certain percentage of national consumption; the core idea was
that imports from a particular country should not exceed a
certain value.
With the crisis developing, the October 2004 indicative
plan introduced radical changes to the government view of
energy supply expansion. Only one combined-cycle plant
based on Argentinean gas was considered for 2007. The
government decided instead to rely on LNG as the alternative and defined projects to build the necessary installations
to import it from abroad. Coal-fired generation and hydro
resources in the southern part of Chile resurfaced as alternatives for future development.
A new period in the history of natural gas in Chile began
with the completion of two private LNG terminals, GNL
Quintero and GNL Mejillones, which supplied the SIC
and the SING respectively with a more secure and reliable
source of natural gas. Both initiatives were set in motion
by the government, which requested two state subsidiaries
to enter into negotiations with the private sector. In effect,
President Lagos requested Enap, the state oil company, to
36

ieee power & energy magazine

begin taking action in that direction, and Enap was successful in obtaining the support of the largest Chilean generator (Endesa), the gas distribution company for the capital
city of Santiago (Metrogas), and an LNG provider (British
Gas). The GNL Quintero terminal began operations at the
end of 2009. Quintero is a terminal for the reception, storage, and regasification of LNG, supplying Santiago and the
central zone of the SIC. It has storage tanks with a total
capacity of 174,000 m3 and a regasification plant that can
process 10 million m3 of gas per day as a base amount and
up to 15 million m3 per day when necessary. The design
of the plant permits regasification of up to 20 million m3
per day. British Gas sold its 20% stake in the terminal in
2013 and is now the sole supplier of LNG. The terminal is
currently owned by Endesa Chile (20%), Metrogas (20%),
Enap (20%), and the partner companies Enagas and Oman
Oil (40%).
A second initiative was started by President Bachelet, who
requested that Codelco, the state copper company, partner
with potential private agents in the northern system in order
to construct a second LNG terminal. GDF Suez joined the initiative and now owns 63% of the project; Codelco holds the
remaining 37%. GNL Mejillones has been in operation since
early 2010 and consists of a floating receiving and regasification terminal built in northern Chile. It initially stored LNG in
a floating unit, after which the fuel went through regasification and was transferred to land via pipeline. A land storage
facility with a capacity of 175,000 m3 of LNG replaced the
floating one in early 2014. Chile has consumed LNG arriving
from Algeria, Egypt, Equatorial Guinea, Qatar, Trinidad and
Tobago, and Yemen.
In 2012, other companies announced their interest in
developing potential LNG projects. Colbun and Gener in
central Chile indicated they were considering floating terminals to feed their existing plants, and Octopus indicated
its interest in building a floating plant and a new combinedcycle generator in southern Chile. These are preliminary
projects, and as yet no relevant developments have taken
place to ensure they will be effectively developed.

Gas Regulation
Aside from the Magallanes zone in Patagonia, where stateowned Enap took the lead, the natural gas business in Chile
has mostly been developed through private initiatives. The
sector is thus essentially nonregulated in terms of structure,
contracting, and pricing. Gas was seen by the private sector
as an attractive new business when Argentinean natural gas
november/december 2014



Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2014

IEEE Power & Energy Magazine - November/December 2014 - Cover1
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IEEE Power & Energy Magazine - November/December 2014 - Cover3
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