Chile looking to gas to meet energy demand, energy minister says

Chile is focusing most of its attention on natural gas to meet the country’s energy demand challenges, stated Maximo Pacheco Matte, the newly appointed Minister of Energy, during a July 2 panel discussion in Houston.

Pacheco’s presentation, Chile: Energy Sector Opportunities, outlined that it will be gas that will power the South American nation’s economy.

While South America is universally recognized as a continent rich with fossil fuels—boasting the country with the largest proved oil reserves in Venezuela alongside robust presalt resources offshore Brazil—Chile, South America’s sole member of the Organization of Economic Cooperation and Development (OECD), is only a modest producer of oil and gas.

Chile is the fifth-largest consumer of energy on the continent. Consumption in 2012 totaled 178.23 bcf of gas, dwarfing the just 42.27 bcf of gas the country produced in the same year, according to data from the US Energy Information Administration.

“We are the poorest country in South America in terms of fossil fuels,” Pacheco said while speaking at the event hosted by The University of Texas at Austin’s Latin America and Caribbean Energy Program. The country’s estimated proved reserves as of Jan. 1 totaled just 150 million bbl of oil and 3.46 bcf of gas (OGJ, Dec. 2, 2013, p. 33).

As a result, the country is exploring ways to meet growing domestic demand.

Reliance on LNG

A promising option for Chile is to import LNG from the US, currently the world’s largest gas producer. “Chileans are optimistic about the prospect of having access to US shale gas,” Pacheco said.

During the 1990s, Chile was highly dependent on Argentina for gas, which was delivered via pipeline, but policy changes and domestic shortages within Argentina motivated Chile to develop its import capabilities. The country now relies on LNG imports from Equatorial Guinea, Trinidad and Tobago, Qatar, and Yemen to its Mejillones and Quintero regasification terminals.

Pacheco said Chile values synergies with other countries in the Americas due in part to efficiencies that come with such relationships. He mentioned the ongoing expansion of the Panama Canal as a project that would loosen LNG trade (OGJ Online, Mar. 15, 2010).

Expansion of the canal will allow passage of LNG carriers, which cannot currently navigate the waterway because of their size. The Panama Canal Authority said in February that the expansion would enter commercial service in January 2016, provided there are no more work stoppages (OGJ, Apr. 7, 2014, p. 121).

In addition to working with the US, Chile is also working with neighboring Peru, Ecuador, and Colombia on gas imports.

Domestic exploration

Although oil and gas production from within Chile pales in comparison with that of its neighbors, resources are present in the Magallanes shale basin in the southern portion of the country, Pacheco noted.

He said that Chilean state-owned Empresa Nacional de Petroleo (ENAP), which was founded in 1969 to procure gas in Magallanes, will play an important role in exploration for gas in the region.

Chile plans to emulate US technological expertise. Hydraulic fracturing has already taken place in Magallanes, and there will be a transition from vertical to horizontal drilling this year.

Pacheco added that the nation also wants to emulate US environmental regulations, but with a process as streamlined as possible. “Our role of the Energy Ministry is to simplify all of this,” he said. Chile’s environmental department is responsible for permit applications of all projects.

Houston-based GeoPark Holdings Ltd. currently operates 6 blocks within Chile, including 100% working interest in the 1,488.5-sq-mile Fell block (OGJ Online, Dec. 12, 2012). ENAP has 50% interest in Flamenco, 50% in Campanario, and 40% in Isla Norte.

GeoPark discovered gas on the Flamenco block last year (OGJ Online, July 2, 2013). The company also made an oil discovery on Campanario on July 1 (OGJ Online, July 1, 2014). Oil exploration in Chile, however, is conducted on a relatively small scale.

Contact Matt Zborowski at matthewz@ogjonline.com.

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