Chile’s ENAP offloads excess 2015 LNG cargoes to Colbun

James Fowler

14-Nov-2014

Chile’s state-owned refiner ENAP has agreed to sell local power generator Colbun the equivalent of three LNG cargoes delivered to the Quintero LNG terminal over the course of 2015 by long-term supplier BG Group.

The deal, announced on 10 November, covers excess LNG volumes which ENAP had been trying to offload as part of its take-or-pay contract with the British supplier. ENAP and Colbun are likely to use the agreement as a basis for reopening talks over a longer term agreement.

In the short term, the deal solves ENAP’s oversupply which had threatened to force the company into paying to divert volumes next year due to the lack of domestic offtakers.

ENAP, alongside power generator Endesa Chile and distributor Metrogas, holds a third of Quintero’s existing 2.5mtpa, 10 million cubic metre (mcm)/day send-out capacity.

An extra 1.1mcm/day in offtake was secured by ENAP in late 2013 during negotiations for new capacity made available through an expansion programme which will take total terminal capacity to 3.75mtpa by 2015.

With limited demand from its own operations, ENAP is understood to have taken this extra capacity in order to market volumes to downstream offtakers on Chile’s Sistema Interconectado Central (SIC) central power grid.

The collapse of talks with Colbun over a long-term agreement earlier this year, however, left the state-owned company looking at receiving an excess of cargoes from 2015. The price of the volumes sold by ENAP to Colbun will be indexed to marginal power costs on the SIC network, ICIS understands.

“ENAP was long in supply, and had to nominate its deliveries for 2015. This allowed Colbun to negotiate the cargoes at a favourable price,” a source in the Americas told ICIS.

The deal with ENAP supplements Colbun’s growing LNG portfolio. The generator will take around six cargoes delivered to Quintero over 2015, after extending a supply agreement with Metrogas in September this year.

As well as receiving volumes from Metrogas, Colbun has previously procured cargoes on the spot market through the marketing consortium for the Quintero terminal, GNL Chile. The company has also shown interest in securing long-term LNG supply to feed its existing gas-fired generation capacity, which totals over 1GW.

Colbun first announced plans in 2012 to develop its own LNG terminal, which were subsequently shelved. The company then entered into negotiations for direct capacity with the current Quintero offtakers in 2013.

But after those attempts to take expansion capacity at Quintero fell through, Colbun instead focused on a possible capacity lending agreement with ENAP. A new management team was then appointed at ENAP, which was understood to have temporarily ended discussions between the parties earlier this year, at which point Colbun extended its supply arrangement with Metrogas.

BG Group holds a 20-year supply contract with each of the three offtakers at the Quintero terminal.

Following renegotiations in 2013, the terminal offtakers can also request the diversion of LNG volumes to other demand points within Chile. Metrogas and ENAP are understood to have used this clause to re-sell volumes to E-CL, the offtaker at Chile’s northern import terminal of Mejillones. James Fowler

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