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| Fig. 1: Negishi LNG Regasification Terminal, Japan. (Source: Wikimedia Commons) |
Chile, a long and mountainous nation in South America, has very few natural gas reserves, so it has historically relied on importing it for domestic electricity generation, as well as industrial and residential uses. [1] Notably, Chile's three neighbors (Argentina, Bolivia, and Peru) do have reserves available for export, but geopolitical considerations have made it difficult for pipeline construction negotiations to be conducted to completion. For instance, some historical territorial disputes still exist between these countries, and lingering feelings about wars fought more than a century ago dominate domestic politics in Bolivia. Thus, Argentina has been the only viable partner to import natural gas via pipeline. In the 1980s, the Chilean government saw a need to streamline the importation of this resource, ideally in an economically efficient manner.
In the early 1990s, Chile and Argentina were able to come to an agreement and build a pipeline that would transport Argentine natural gas to Chile. A number of political maneuvers needed to be done for this project to come to fruition, but many saw it as a positive outcome, since it would help to integrate the energy markets of Latin American nations. [1]
Because of an economic downturn, the Argentine government began to impose price ceilings on natural gas in 2004, which meant that there was less of an incentive for private gas exploration firms to look for more extraction sources, lowering the supply for Chile and destroying the domestic natural gas industry in Argentina. [1,2] Eventually, the supply was cut off, despite protests from Chile and attempts at a diplomatic solution.
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| Table 1: Natural Gas imports in Chile, 2001-2012. [3] |
Table 1 shows the rapid reduction in natural gas imports from pipeline sources, which can be explained by the aforementioned political situation in Argentina. Because Chile was no longer able to rely on this source, they began to construct and finance liquefied natural gas (LNG) terminals to meet the needs of the country's residents. [2] The first terminal opened in 2009, and it can be seen in Table 1 that pipeline imports gradually reduced to zero once Chile was able to find a stable source of natural gas. LNG is transported on ships and upon arrival to its final destination, is regasified for customers. An example of an LNG terminal is shown in Fig. 1.
The main source of natural gas for Chile is now Trinidad and Tobago, purchased through Shell, a multinational corporation (no longer purchasing from corporations subject to volatile policies). [3,4] Because LNG has high costs of production, this option may be more expensive than pipeline deliveries. [5] Nonetheless, when taking further context into account, Chilean policymakers believed this to be the best option.
When nations do not have reserves of natural resources available to them for basic functioning of their societies, they must import these materials. However, political and economic considerations often prevent plans for energy integration from functioning smoothly. In this example of the Chile-Argentina natural gas relationship, Chile was able to reorient its reliance on Argentine imports over to a more dynamic system that allows for greater flexibility and lower risk.
© Caetano Melone. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] D. R. Mares and J. M Martin, "Regional Energy Integration in Latin America: Lessons from Chile's Experience with Natural Gas," Third World Q. 33, No. 1, 53 (2012).
[2] S. Reinstein, "Improving Natural Gas Distribution in Chile," World Bank, June 2015.
[3] "BP Statistical Review of World Energy 2013," British Petroleum, June 2013.
[4] R. Shepherd and J. Bell, "Liquefied Natural Gas from Trinidad and Tobago: The Atlantic LNG Project," James A. Baker III Institute for Public Policy, Working Paper No. 30, May 2004.
[5] W. Won et al., "Current Trends For the Floating Liquefied Natural Gas (FLNG) Technologies," Korean J. Chem. Eng. 31, 732 (2014).
