Air Quality — 01 June 2014

1 June 2014. Santiago, Chile.  Thumbnail photo by Herry Lawford.

Today we interview Alvaro Rios, who is Partner Director of GAS ENERGY Latin America and Drillinginfo, about the possibility of Peru supplying natural gas to Chile.  He explains that Peru is building a pipeline all the way from the gas fields near Lima to the south of Peru, only 100 km from the border with Chile.  Given that Peru and Chile have recently settled the issue of the maritime border, is it possible that Peru and Chile can extend that pipeline into Chile?  Let’s ask Mr Rios.

Mr. Rios, is based in Bolivia and performs studies in the energy sector for all of Latin America. He was formerly the hydrocarbon Minister of Bolivia and Secretary Executive of Olade in Ecuador.

Mr. Rios, who is Peru’s major partner now? Is there any possibility that Chile can buy natural gas from Peru because of two things: (1) is there capacity and (2) also is there now the political solution to allow that?

Peru and Chile Peru have overcome somehow geopolitical and political things with the Hague resolution. With that in mind, things needs to be worked out over the energy integration between both countries.

In that respect, there are two things that can be done.  One is why not the extra capacity from the existing LNG terminal in Pampa Melchorita, that does not go to Mexico, can easily be shipped down to the two LNG terminals in Chile, benefiting both countries instead of going to long-distance markets in Asia or around the world.

These can be worked out.  These are things in Latin America that we need to do.  We need to integrate.  We need to cooperate and take advantage of distance. It is not possible that ships are coming all the way from Africa, and Peru is sending ships all the way to Asia or Europe, when nearby solutions are close by. Back and forth, this costs the region around 6 US$/MMBTU.

Also Peru is getting ready to build a pipeline down to southern Peru, where electricity and natural gas integration are something that must be started to discuss, because it is something that Peru has in excess and Chile has urgent need, mainly for the mining industry.

Where is this pipeline going?

It is going from nearby Camisea to nearby Ica and Ilo in southern Peru.

Is that far from Chile?

It is not far from the border. 100 km at the most.

A pricing scheme needs to be worked out that is beneficial to both parties and for private parties. We don’t need to think on what the actual pricing scheme is.  We need to have a natural gas integration project just like Bolivia has with Brazil and Argentina that benefits both countries. That is the idea intelligent solutions benefiting both parties.

What is an Integration Project?

A pipeline sort of bi-national agreement where the private sector participates and also some kind of bi-lateral agreement where the natural gas of Peru can reach northern Chile facilities.  Its better pricing that Asia pricing, and its better for Peru, because it’s not shipping long distance and getting better net backs.  That’s all it is.  So a formula that benefits both parties and private parties could be easily worked out.

All I am saying that this be done because shipping gas is very expensive. If Peru’s natural gas goes to Europe or Asia that is very far.  It costs a lot of money to ship that natural gas.

This can be LNG or pipeline.

Do you know if anyone in Chile and Peru are talking about this?

No. All I know is this is something that Latin American counties need to be doing. I think Chile and Peru have overcome a little bit of the geopolitical and political problems with the agreement they have just reached.

What about Bolivia?

Not at this point. One is the political and geopolitical problems have not been resolved and that is going to take some time still. The second is regarding commercial and production aspects.  Argentina and Brazil are going to demand the next ten to fifteen years more natural gas from Bolivia than there is existing infrastructure for these markets.  Most of the existing and future reserves will go to these markets. There is not really a need at this moment to look to the Chilean market

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