ENERGY SUPPLY SECURITY 2014 - International Energy · PDF fileof the publication Energy Supply...

Part 3The following partner country profile is an excerpt from Chapter 5 of the publication Energy Supply Security 2014 and is not intended as a stand-alone publication.

ENERGY SUPPLY SECURITY 2014

CHAPTER 5: Emergency response systems of individual IEA partner countries

Recognising that oil consumption and net imports in some non-member IEA economies are increasing rapidly, the IEA promotes dialogue and information-sharing on oil security policies; it also shares information and experience about creating national emergency oil stocks with key transition and emerging economies, such as China, India and the countries of the Association of Southeast Asian Nations (ASEAN). Expanding international co-operation with all players in global energy markets to improve market transparency through the collection of more accurate and timely data is also a critical component of the work of the IEA towards greater energy security.

This chapter provides a profile of the emergency response systems of China and India, countries belonging to ASEAN and a detailed overview of Chile, an IEA candidate country. As in the previous chapter, much information in this chapter is based on Emergency Response Assessments (ERAs) or reviews conducted in several of the countries represented: notably Thailand (2010), Chile (2011) and India (2013).

The profiles are presented in the following general sequence, subject to the availability of data in particular cases:

Key dataKey oil data, 1990-2018Key natural gas data, 1990-2018Total primary energy source trend, 1973–2012

Infrastructure map

Country/regional overview

OILMarket features and key issuesDomestic oil productionOil demandImports/exports and import dependencyOil company operations

Oil supply infrastructureRefiningPorts and pipelinesStorage capacity

Decision-making structure

StocksStockholding structureCrude or productsLocation and availabilityMonitoring and non-compliance

Stock drawdown and timeframeFinancing and fees

Other measuresDemand restraintFuel switchingOther

GASMarket features and key issuesGas production and reservesGas demandGas import dependencyPorts and pipelinesStorage

Emergency policyEmergency response measures

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Chile

Key data

Table 5.2.1 Key oil data

1990 2000 2005 2010 2011 2012 2018*

Production (kb/d) 24.6 9.0 7.6 13.3 12.8 11.3 7.7

Demand (kb/d) 145.5 239.6 272.3 322.9 333.9 356.2 397.3

Motor gasoline 32.5 56.1 49.7 65.1 60.6 62.6 -

Gas/diesel oil 46.5 82.2 102.3 142.2 155.3 167.5 -

Residual fuel oil 27.0 32.9 35.5 32.6 33.1 28.2 -

Others 39.6 68.5 84.8 82.9 84.9 97.9 -

Net imports (kb/d) 120.9 230.6 264.7 309.6 321.1 344.9 389.6

Import dependency (%) 83.1 96.2 97.2 95.9 96.2 96.8 98

Refining capacity (kb/d) 0.0 0.0 0.0 226.6 226.6 226.6 -

Oil in TPES** (%) 46 42 41 49 47 46 -

* Forecast. ** TPES data for 2012 are estimates.

Table 5.2.2 Key natural gas data

1990 2000 2005 2010 2011 2012* 2018**

Production (mcm/y) 1 679 1 902 1 911 1 848 1 480 1 217 1 323

Demand (mcm/y) 1 360 6 196 8 086 5 296 5 703 5 047 6 033

Transformation 75 2 022 3 269 2 101 2 872 0 -

Industry 886 3 550 3 614 2 170 1 700 0 -

Residential 154 288 410 464 464 0 -

Others 245 336 793 561 667 0 -

Net imports (mcm/y) - 319 4 294 6 175 3 448 4 223 3 830 4 710

Import dependency (%) - 23.5 69.3 76.4 65.1 74.0 75.9 78

Natural gas in TPES (%) 8 21 24 14 14 13 -

* 2012 data are estimates. ** Forecast.

Note: This section was written by the IEA, based on information provided by the Government of Chile during the Emergency Response Assessment, public information, IEA statistics, press reports and reports from various energy analysts. It does not necessarily represent the official view of the Chilean government. All errors and omissions are solely the responsibility of the IEA.

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Figure 5.2.1 Total primary energy source (TPES) trend, 1973-2012

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Map 5.2.1 Oil and gas infrastructure of Chile

Quintero

Concepcion

Taltal

Arica

Tocopilla

Antofagasta

Mejillones

CHILE

Argentina

Bolivia

Peru

Santiago

La Paz

Punta Arenas

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NORANDINOGASATACAMA

Pemuco

Quintero

Concon

Gregorio

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Argentina

Bolivia

Peru

Santiago

La Paz

Punta Arenas

0 500km

BioBio

This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

Refinery

Crude oil pipeline

Oil products pipeline Existing pipelines

Existing LNG import terminal

Gas fields

Regasification plant


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Country overview Over the last decade, Chile has experienced several serious energy supply incidents including major droughts, a sustained gas supply cut from Argentina (since 2004), and a major earthquake in early 2010 which affected electricity networks and refineries and caused several black-outs.

Chile has a unique and sinuous geography – it runs 4 300 km from north to south and only 175 km from east to west – and its energy markets are regionally disjointed, particularly as the regional gas and electricity grids are not connected.

Chile’s oil production accounted for only 3% of its total oil consumption in 2012. Production is located in the southernmost region of Magallanes y la Antártica Chilena, producing around 1 thousand barrels per day (kb/d) in 2012.

In 2012 Chile’s oil demand was 333.5 kb/d. Gas/diesel oil accounts for 45% of product demand, and gasoline for 19% of demand. The demand for gasoil soared significantly as a result of the Argentine gas supply crisis, as gas-fired power plants switched to gasoil. Gasoil demand almost doubled between 2003 and 2008. In 2000, only 4% of gasoil demand was used for power generation, whereas it reached almost 30% in 2008. The construction of liquefied natural gas (LNG) terminals and the arrival of LNG supplies in Quintero in the centre of the country in mid-2009, and Mejillones in the north in 2010, attenuated the demand for gasoil which has stabilised since then.

Chile’s refining portfolio is among the most sophisticated in the region. Its state-owned company (ENAP) operates three.apacity of 234 kb/d.

Chile does not currently hold strategic oil stocks but its oil industry participants have an obligation to hold stocks covering 25 days of their sales over the previous 6 months, or average imports over the same period if imports are for their own consumption. This requirement is currently not monitored or enforced.

With regards to natural gas, Chile has fragmented gas consumption centres. In the far north of the country gas is used predominantly to generate electricity for the mining industry and is supplied via the Mejillones LNG terminal. In the central and southern areas (including Santiago), gas is used both by industry and by residential customers and is primarily supplied by the Quintero LNG terminal. In the far south (Magallanes), gas supplies come from local production (1.2 bcm in 2012) and are the basis of the local energy mix (both for electricity generation and for heating purposes for the residential sector) as well as a key input in methanol production.

The bulk of Chile’s 5.1 bcm gas demand in 2012 came from the power generation sector (51.9%). Industry and the petrochemical sector accounted for 36.4% each, and residential/commercial for the remaining 11.8% of Chile’s gas demand.

Chile has no specific response system for handling a natural gas supply emergency. However, in response to the 2004 crisis resulting from the restriction of its natural gas supply from Argentina, the government, through the Superintendency of Electricity and Fuels (SEC), issued SEC Exempt Resolution No 754. This resolution established a priority order for gas supplies in case of a shortage. Once the crisis was over and the LNG terminals were built, the resolution was revoked.


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Oil

Market features and key issues

Domestic oil productionIn 1990, Chile produced around 15 kb/d of crude oil, equivalent to some 14% of its oil demand. That percentage has been decreasing steadily, although recent efforts to encourage exploration activities through Special Oil Operation Contracts have started to reverse that trend somewhat. Nevertheless, production only accounted for 3% of total oil consumption in 2012. Production is located in the southernmost Magallanes region, standing at around 1 kb/d in 2012.

Oil demandIn 2012 Chile’s oil demand stood at 333.5 kb/d. Gas/diesel oil accounts for 45% of product demand, and gasoline for 19% of demand. Demand for gasoil soared significantly as a result of the Argentine gas supply crisis, as gas-fired power plants switched to gasoil. Indeed, gasoil demand almost doubled between 2003 (before the gas disruption) and 2008 (complete disruption), growing from 87 kb/d to 169 kb/d. In 2000, only 4% of gasoil demand was used for power generation, while this figure reached almost 30% in 2008. The construction of LNG terminals and the arrival of LNG supplies in Quintero (centre) as of mid-2009 and in Mejillones (north) as of 2010 attenuated the demand for gasoil which has since stabilised.

Figure 5.2.2 Oil consumption by sector, 1973-2011

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1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Commercial/agriculture/other

Residential

Industry

Transport

Transformation

As is the case in most OECD member countries, the transport sector accounts for the majority of oil product demand in Chile. In 2012 it was 46%, followed by the industrial sector with 25%. More unusual in relation to Chile’s OECD peers is the fact that in 2011, 19% of demand came from the power sector (in the form of demand for diesel).

Imports/exports and import dependencyWith oil demand in Chile estimated at around 335.5 kb/d in 2012, Chile is a large net importer of both crude oil and oil products. About 95% of Chile’s crude imports came


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from South America in 2012. Domestic product supply is dominated by the Chilean National Oil Company (ENAP). Nevertheless, distillate imports by other companies made up a larger share of total supply in 2007 and 2008 to replace restricted natural gas supplies. Competitors with product supply from neighbouring Argentina have struggled in light of the stricter motor fuel standards in Chile and export restrictions in Argentina. As a result, most imported products are from OECD countries.

Figure 5.2.3 Oil demand by product, 1998-2012

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Residual fuels

Other gasoil

Diesel

Jet and kerosene

Motor gas

Naphtha

LPG and ethane

Oil company operations An established, competitive landscape keeps market shares in the retail sector fairly static, although two regional players, Petrobras (Brazil) and Terpel (Colombia), entered the Chilean market in 2008 by acquiring existing retail portfolios. With limited ability to compete on price (because companies rely on imports or buy from ENAP at import-parity prices), many competitors look to branding, location and non-fuel offerings to distinguish themselves and increase throughputs. There are over 1 660 retail sites in Chile.

Figure 5.2.4 Crude oil imports by origin 2012

Brazil43%

Argentina18%

Colombia16%

Ecuador14%

Peru5%

Other4%


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Oil supply infrastructure

RefiningENAP is engaged in the exploration, production, refining, and marketing of hydrocarbons and their derivatives. It is the only refiner in Chile, operating three refineries (Concón/ Aconcagua, Concepción/Bío Bío, and Magallanes/Gregorio) with a total topping capacity of 234 kb/d.

ENAP’s refining portfolio is among the most sophisticated in the region. The crude slate has moved towards intermediate and heavier crudes as the complexity of domestic refining has increased, allowing the company to take advantage of the more abundant, heavier, cheaper crudes available in South America.

The February 2010 earthquake severely damaged the Bío Bío Refinery, putting it out of operation for three to four months. The Concón refinery was out for six weeks.

Figure 5.2.5 Refining output vs. demand, 2012

0 20 40 60 80 100 120 140 160 180

Other products

Residual fuels

Gas/diesel oil

Jet and kerosene

Gasolines

Naphtha

LPG and ethane

Output/demand (kb/d)

Demand

Refineryoutput

Ports and pipelinesWith its long coastline, Chile has 20 ports which are able to receive crude oil or oil product deliveries. Each has one or two docking terminals.

Transportation by pipeline is carried out exclusively by ENAP and Sonacol, a joint venture between Copec, ENAP, Petrobras (previously ExxonMobil), Abastible and ENEX (previously Shell). Sonacol is the main oil pipeline operator in Chile, owning and managing around 460 km of domestic oil product pipelines. Sonacol owns six pipelines and three terminals in the regions of Valparaíso, Bernardo O’Higgins and Metropolitana. Until recently, Sonacol was considered a “strategic” company, which meant that its workers were forbidden to go on strike, but this is no longer the case.

Sonacol’s logistics assets are particularly important in the Santiago Metropolitan region, where it supplies more than 98% of all products. Products are received in Quintero Bay and loaded from ENAP’s Aconcagua Refinery, and transported to Santiago by means of a multi-product pipeline.


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There is also a dedicated liquefied petroleum gas (LPG) pipeline to Santiago, which transported 7.5 million barrels (1.2 mcm) of LPG in 2008. Utilisation of the LPG pipeline is estimated at around 50%.

In addition, a dedicated jet-fuel pipeline supplies Santiago’s Arturo Merino Benítez airport, which is operating at near full capacity.

A two-directional product pipeline from San Fernando to Santiago is connected to ENAP’s Concepción-San Fernando pipeline, which transports the production of the Bío Bío Refinery up north.

Storage capacityChile’s total storage capacity stands at 22 mb (3.65 mcm), of which 28.6% is crude storage and the rest is product storage.

The company with the most important storage capacity is ENAP. This storage capacity is significantly concentrated in its refineries: Aconcagua, Bío Bío and Gregorio. ENAP also operates fuel storage facilities in Maipú, San Fernando and Linares, all located in the central area. ENAP has 54.6% of the Chilean LPG storage, 57.8% of middle distillates and gasoline storage, and 77.2% of heavy fuel oil (HFO) storage.

However, other companies have their own storage facilities as well, such as Copec, ENEX, Petrobras, Terpel (which rents infrastructure to the Chilean chemical company OXIQUIM), JLC Combustibles and Hugo Najle.

One important feature in terms of security of supply is that storage capacity is not evenly distributed across the country, with two-thirds of the storage located in regions V and VIII1 in the centre of the country where the two main refineries are located and where most of the demand is concentrated.

Decision-making structure

Chile has no specific national emergency strategy organisation (NESO), but does have an organisation for handling national emergencies caused by natural disasters or other events that affect the population. The National Emergency Office (Onemi), overseen by the Ministry of the Interior and Public Security, is responsible for co-ordinating public and private efforts to control emergencies, disasters and catastrophes and to co-ordinate all the actions and operations executed by the National Civil Protection Agency.

However, the SEC and the Chilean Nuclear Energy Commission (CCHEN), both of which are part of the Ministry of Energy, have their own emergency plans which are activated by events that alter the normal operation of the energy market.

In recent years the Chilean government has taken significant steps to improve its monitoring and communications in the event of an energy crisis. In the case of the oil market, the Ministry of Energy is using an informal market monitoring system for supply and demand, assessing the level of stocks for the country as a whole in terms of days of demand that could be covered. Three categories have been distinguished, namely “normal” (over 25 days), “alert” (between 15 and 25 days) and “serious” (less than 15 days).

In addition, in 2010, in the aftermath of the big earthquake, the ministry established co-ordination and communication protocols with the energy industry so as to have prompt information when events occur that significantly disrupt the energy supply. A 24-hour reporting system was implemented, ready to be used in case of an oil or power supply crisis and to enable key actors to make well-informed decisions, based on the

1. Chile is divided into 15 administrative regions.


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best available information. In 2011, the government undertook a study to revise and complement this communications system. As a result, these protocols with industry were updated and new protocols were established with the SEC and Onemi, now superseded by the National Civil Protection Agency. In general terms, these documents outline emergency procedures for ensuring efficient and streamlined delivery of information to facilitate the decision-making process in case events threaten the normal energy supply.

Stocks Currently oil industry participants have an obligation to hold stocks. Producers (refineries) and importers of liquid, petroleum-based fuels are required to maintain an average stock of these products equal to 25 days of sales during the previous 6 months, or average imports over the same period, if imports are for own consumption.

Article 7 of Decree with Force of Law N° 1 of 1978 of the Ministry of Mining and Energy states: “Every producer or importer of liquid, petroleum-based fuels is required to maintain an average stock of each product which is equal to 25 days of average sales during the previous six months or average imports for the same period of time, if it is for own consumption”.

However, this legal provision does not include a regulation to determine how such reserves are quantified, administered, or managed in emergency situations. Companies that maintain reserves administer them freely based on their operational needs. In situations of restriction of supply, distribution companies assist one another in maintaining supply to the country, in co-ordination with ENAP and the energy authorities.

To monitor compliance with this requirement, the SEC has ordered producers and importers of liquid, petroleum-based fuels to submit a monthly spreadsheet detailing sales for the period, daily stocks of liquid petroleum-based fuels and crude oil in their facilities, and imports of liquid petroleum-based fuels during the same period. In addition, the National Commission of Energy (CNE) now requires major distributers (including producers and importers) of petroleum-based fuels to submit daily stock reports for key fuels in their facilities on a weekly basis.

Because the law is unclear about who is strictly responsible for holding these stocks, and there is no clear methodology for how to count them, there is no enforcement of compliance with this obligation, and no penalties have ever been levied for non-compliance. There is also no mechanism or procedure in place for using these reserves in case of an emergency.

Other measures

Demand restraintUntil 2011, Chile did not have a clearly established demand restraint policy for liquid fuels. However, that year the Ministry of Energy elaborated a plan that included six demand restraint measures. These measures mainly targeted the transport sector,, although not exclusively, since it has the biggest share of consumption.

During 2012, the government undertook a study to revise these measures to assess if there were legal or administrative restrictions for their implementation. The main conclusion of the study was that to establish an oil demand restraint plan, a specific law is required.


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Fuel switchingFuel switching from oil to other fuels is very limited. On the contrary, most fuel switching in Chile has involved switching from other fuels into oil. For example, switching to diesel was how the operators of many gas-fired power plants adapted to an acute gas supply disruption following the curtailment of gas supplies from Argentina. More regularly, oil consumption often spikes during periods of drought as oil-based thermal generation is used to replace hydropower generation.

OtherChile’s motor fuel specifications for gasoline – 50 parts per million (ppm) of sulphur lowered to 15 ppm in the Metropolitan Region in September 2011, and in the other regions in 2012 – and diesel – as of September 2013, 50 ppm sulphur and 50 cetane – are stricter than those of its neighbouring countries. Therefore, product imports are sourced from OECD countries, which are located further away from Chile. In particular, the diesel specifications stipulated by Chilean regulations mean that diesel can only be supplied by a small number of refineries located in Chile, Japan, the Republic of Korea and the United States. There is little potential for neighbouring countries to provide an alternative source of supply, as they produce insufficient diesel even to meet their own internal demand.

In September 2013, a new regulation was implemented that requires all diesel used for transportation purposes to comply with the Euro V specification (15 pppm sulphur and 50 cetane.

In situations of fuel supply shortage, these restrictions can exacerbate a disruption of supply. This is notably the case for diesel oil, where imports in some years have accounted for more than 60% of domestic consumption, potentially posing a short-term supply risk because of the lack of available fuel in the international market to meet Chile’s standards.

This occurred in 2008, following the disruption of gas supply from Argentina. The domestic impact of the loss of gas supplies at this time was exacerbated by a drought that boosted demand for thermal electricity generation, and by a tight global market for high-quality diesel. Diesel oil constituted an essential input as a backup fuel for replacing gas in the generation of the country’s electricity. Diesel consumption had already doubled since 2004 as a result of cuts in imported natural gas and the dry hydrology of the country (affecting hydroelectricity generation) during 2007 and 2008. At the same time, the transport sector lacked substitute fuels for diesel.

In response to these imperatives, the government lowered the specifications for B-grade diesel oil in 2008 for a one-year period, in order to expand Chile’s options in terms of purchasing from foreign refineries.

Gas

Market features and key issues

Gas production and reserves Chile has fragmented gas consumption centres. In the far north of the country gas is used predominantly to generate electricity for the mining industry and is supplied via the Mejillones LNG terminal. In the central and southern area (including Santiago), gas is used both by industry and by residential customers and is primarily supplied by the Quintero LNG terminal. In the far south (Magallanes y la Antártica Chilena), gas supplies


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come from local production (1.2 bcm in 2012) and are the basis of the local energy mix (both for electricity generation and heating purposes for the residential sector) as well as a key input in methanol production.

Gas demandAn event of the utmost significance for the Chilean gas market was the abrupt curtailment of piped gas supplies from Argentina from 2004. As a result, consumption plummeted, from a peak of 8.4 bcm in 2005 to just 2.8 bcm in 2008. Demand recovered in 2009 with the advent of the new Quintero LNG terminal, reaching 3.3 bcm. This was followed by the opening of the Mejillones LNG terminal, and the associated growth in volumes at the Quintero terminal. Natural gas demand is estimated to have increased considerably, reaching 5.02 bcm in 2012.

Chile is an attractive market for LNG, as the country is short of gas and its demand is counter-seasonal to markets in the northern hemisphere. The LNG terminals are now able to replace part of the Argentinean gas that was used in the northern and central regions of the country. The methanol plant in the Magallanes region receives very little imported gas and relies instead on limited domestic production.

The bulk of gas demand (51.9%) in 2012 came from the power generation sector. Industry and the petrochemical sector accounted for 36.4% each, and residential/commercial for the remaining 11.8% of Chile’s gas demand.

There is, however, no transparent or liquid wholesale spot market for natural gas in Chile.

Figure 5.2.6 Natural gas consumption by sector 1973-2011

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Gas import dependencyThe northern and central regions of Chile are completely dependent on imports to meet their gas demand. Production in the southernmost Magallanes region remains insufficient to meet the needs of the local methanol plant (Methanex).

Argentina was the sole supplier of gas to Chile from 1996 to 2008. However, the recent construction of Chile’s two LNG terminals has greatly diversified Chile’s supply options.


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Figure 5.2.7 Natural gas imports by source in 2012

Trinidad and Tobago74%

Equatorial Guinea9%

Yemen 8%

Egypt 6%Norway 2% Other 1%

Gas company operations The Association of Natural Gas Distributors (AGN), represents the four natural gas distribution companies operating in central and southern Chile, namely Metrogas, GasValpo, GasSur, Intergas and Gasco Magallanes. AGN members have no stake in the Mejillones LNG plant, and do not distribute gas in the far north. In total, the gas distribution market supplies around 560 000 clients in the Metropolitan, V, VI, VIII and XII regions of Chile.

Innergy is the main merchant company for the Concepción area (some 400 km south of Santiago). In 2012, Innergy received on average 125 000 m3/d of gas from Argentina to meet residential demand, but there are large seasonal swings in the delivery pattern. This gas comes through Gasoducto del Pacífico.

To meet its Bío Bío Refinery demand, ENAP developed a “virtual pipeline”, through which LNG supplies are transported by truck from Quintero to Pemuco, a medium-size regasification plant in the Concepción area. Pemuco has the capacity to process 600 mcm/d of gas. Currently, ENAP is injecting approximately 340 mcm/d exclusively to Bío Bío. Innergy has approached ENAP to discuss the option of injecting additional gas for residential and other industrial customers. This LNG trucking option, although expensive, could provide a higher level of energy security.

There are few LPG distributors in Chile (notably Gasmar, one of the key players and importers). LPG storage is generally estimated to cover around 15 days of peak winter demand at any one time. In the north where weather conditions are milder – and therefore consumption lower – storage levels are equivalent to around five days of peak demand.

Gas supply infrastructure

Ports and pipelinesChile has two LNG terminals, located at the ports of Quintero (in the central region) and Mejillones ( in the far north). These terminals provide a strong degree of energy security given their flexibility to contract supplies from different sources.

Quintero (2.9 bcm/year) has a regasification terminal in Quintero Bay which was completed in July 2009, and which feeds the central gas market of the Santiago Metropolitan and Valparaíso by pipeline. Quintero was the first land-based regasification facility in the southern hemisphere.

The plant has three vaporisers (5 mcm/d each), but only two are used at any one time, so as to have one spare as a backup for major emergencies. The maximum draw-down rate for Quintero is 10 mcm/d. Quintero has an average send-out capacity of 8 mcm/d, with a


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historical peak of 10 mcm/d, which is reached during dry seasons when there is not enough hydro capacity and all gas power units of the central area are working to full capacity.

Mejillones (748.3 mcm/year) is located in the far north of the country, and initially was a 50/50 joint venture between the Chilean state copper miner Codelco and GDF Suez. As of the end of 2013, Codelco owns 37% and GDF Suez owns 63%. Mejillones started as a floating offshore storage terminal, but an onshore storage tank is currently under construction; it is expected to be in regular operation by 2014. The LNG onshore regasification terminal began commercial operations in May 2010 and theoretically has the capacity to send out 5.5 mcm of gas per day, enough to produce 1 100 megawatts (MW) of electricity.

Chile has close to 20 ports that can be used for delivering oil products to the market, but only three are actually equipped to receive LPG imports. As a result, LPG supplies (particularly in some of the more isolated regions in the southern regions of the country) are dependent on road deliveries.

Since the late 1990s, a series of six pipelines have been built linking Chile to Argentina. The flow through these pipelines was restricted as of 2004, and then almost completely cut during the winter of 2007-08, rendering the pipeline infrastructure relatively useless.

The Quintero LNG terminal now supplies gas to the Santiago pipeline network through the reversible Electrogas pipeline, which links the terminal with the power stations in Quillota and then with the GasAndes Pipeline. Electrogas maintains some 850 000 m3 of gas in its pipes for distribution companies.

StorageChile has no stand-alone gas storage sites. The geology and seismic nature of the country makes gas storage problematic. The fact that gas storage is considerably more costly than oil storage is an additional impediment to developing gas storage sites.

However, storage capacity does exist at the country’s two LNG terminals: Quintero has the equivalent of 334 000 m³ and Mejillones has 160 000 m³. However, there is no obligation for the LNG terminal operators to hold a minimum amount of stocks, despite the fact that weather conditions can disrupt supplies, particularly in Quintero.

Emergency policy

Chile has no specific response system for handling a natural gas supply emergency. However, in response to the 2004 crisis resulting from the restriction of the natural gas supply from Argentina, the government issued SEC Exempt Resolution No 754. This resolution established a priority order for gas supplies in case of a shortage. Once the crisis was over and the LNG terminals were built, the resolution was revoked.

In addition, Decree 67 of 2004 issued by the Ministry of Economy, Promotion and Reconstruction, which approved the Regulation on the Network Gas Service, contains an article (Article 63) which establishes the following obligation for gas distribution companies: “supply security must be guaranteed by concessionaires in order to satisfy the demands of clients or consumers with firm contracts, projected for the next two years.” Towards that end, the companies must have supply and gas transportation contracts and/or their own production and/or storage facilities in order to meet at least the maximum daily consumption projected for its services for the following two years, and at least the total firm consumption projected for the next two years.

Article 66 of the same Decree indicates that a gas distribution company must inform the SEC of any emergency within 24 hours of learning of the event.

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