GasAtacama has US LNG Providers Lined Up

Posted by Eric Haun
Thursday, April 10, 2014
Photo: GasAtacama

GasAtacama, energy provider to metal producers in Chile's Atacama desert, has lined up eight potential U.S. natural gas suppliers for a proposed import terminal on its Pacific Coast, but uncertainty about energy demand has delayed deals, CEO Rudolf Araneda told Reuters on Thursday.

GasAtacama plans to build a $350 million offshore liquefied natural gas (LNG) import terminal that would take shipments of the fuel to help create 500 megawatts of electricity for power-hungry miners in the mineral-rich north.

But construction plans for the Floating Storage Regasification Unit (FSRU) are in limbo as miners in the world No.1 copper producer dither over their expansion plans in the face of lower copper prices, higher costs and local opposition, creating a domino effect for power providers' investment plans.

"We've negotiated with various producers, but we can only close a deal when we've closed the sale of energy, you have to do it back-to-back," Araneda told Reuters on the sidelines of the CRU/CESCO copper conference. "But miners don't have their expansion plans approved, they're in a wait and see (mode). Uncertainty is the problem."

The uncertainty surrounding miners' power demand should be dispelled next year, Araneda said. "Decisions are being pushed back to 2015," he added.

If all planned mining expansions materialize, massive deposits in the Atacama desert will require between 1,000 and 2,000 megawatts, according to Araneda.

The Andean country is increasingly eyeing imported LNG as a quick, substantial and environmentally-acceptable solution to that looming energy crunch.

The push towards LNG has been further bolstered by a surge in shale gas production in the United States that is transforming the global energy market. Once a regular LNG importer, the United States is now set to export significant volumes of LNG across the globe by the end of the decade, including to Chile.

Chile already imports LNG, which is supercooled into a liquid for shipping, mostly from Equatorial Guinea and Trinidad and Tobago, to two regasification terminals. But experts say the gas has potential to be exploited further. Trading firms have already signed tentative deals to export gas to Chile from a proposed export plant in Louisiana, which is expected online in 2018.

Araneda said GasAtacama had eight potential providers in the United States, underlining that a free-trade agreement between the two countries made it attractive to ship LNG to Chile despite its relative small size.

GasAtacama told Reuters in 2012 that it saw 20-year contracts for 500 megawatts of power yielding roughly $4 billion.

When asked on Thursday if a specific client could be on the brink of approving a new project or expansion that would require power, Araneda said yes, but declined to name the miner.

In the meantime, GasAtacama is holding off on its FSRU project, which was awarded to liquefied natural gas shipping company Golar LNG Ltd.

"The FSRU has been contracted to the world's best provider, we have all the permits... but the pre-condition is that we succeed in obtaining 500 megawatts in contracts," Araneda said, stressing that the construction time of a FSRU is shorter than a mining expansion.

So far, the FSRU's price tag hasn't crept up, Araneda added.

Electricity generator Endesa Chile last month announced it would assume full ownership of Gas Atacama by buying the remaining 50 percent stake owned by private equity fund Southern Cross for $309 million in cash.

(Reporting by Alexandra Ulmer; Editing by Alden Bentley and Edward McAllister)

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