Power auctions test Chile’s LNG ambitions

Government ambitions to increase the use of LNG across Chile’s power grid will be tested on 11 December when national power distributors association Empresas Electricas declares the results of the country’s latest power auctions.

Two of Chile’s existing LNG importers have submitted offers through the auction, which is seeking the supply of 13TWh/year in baseload and variable electricity supply between 2016 and 2034.

Another potential generator is looking to secure a power purchase agreement (PPA) through the auction, in order to justify construction of what would be the country’s third LNG import facility.

Chilean generator E-CL, a subsidiary of Paris-based energy supplier GDF SUEZ, is understood to have presented offers in the round based on the use of its gas-fired power plants located close to the GNL Mejillones regasification terminal.

Electricity would be delivered from the plants to Chile’s Sistema Interconectado Central (SIC) power grid through a purpose-built 600km transmission line linking to the northern grid.

E-CL is understood to have been looking for up to three extra LNG cargoes a year for delivery to Mejillones from 2017 in order to provide the necessary power to meet commitments secured through the auction.

Talks had been held with several international providers, market sources in the Americas told ICIS. Parent company GDF SUEZ was identified as the most likely supplier of these volumes, according to one source, based on its existing commitment to deliver four to five cargoes a year to E-CL through to 2026. However, confirmation that a deal was reached could not be made before publication.

The local arm of Spanish power generator Endesa will also participate in the round, although it is unclear how the company’s gas-fired projects will factor in meeting any commitments awarded through the auction.

As the biggest generator on the SIC grid, Endesa has a diverse portfolio of generation sources that could be used to cover awards made in the round. This includes the 244MW Taltal and 767MW GasAtacama plants currently sitting idle in northern Chile.

The use of either project would require Endesa to acquire regasification capacity at the Mejillones terminal. The company has previously registered its interest in reserving slots at the facility, but has yet to make any concrete commitment, Chilean sources told ICIS.

Endesa could use a flexible destination clause in its existing long-term supply agreement with BG Group for the Quintero terminal to bring volumes into Mejillones and fire either plant. Endesa is one of three offtakers at Quintero, alongside Chilean state refiner ENAP and local gas distributor Metrogas.

The Spanish generator has also secured approximately 1.5mtpa in offtake from the greenfield Corpus Christi liquefaction project currently being developed by US company Cheniere in south Texas, volumes from which could be brought into Chile.

Penco participates from the south

Power company Biobio Genera also participated in the auction, offering output from the 1.1GW El Campesino power plant planned for Concepcion in the central south of the country.

The generators’ plans are based on the import of LNG through the GNL Penco project proposed by Cheniere and Santiago-based project developer Andes Mining and Energy. Volumes would be delivered by Cheniere from either Corpus Christi or the Sabine Pass terminal under construction in Louisiana.

The GNL Penco and El Campesino projects are not expected online until 2019, sources in Chile told ICIS.

The award of a PPA for the El Campesino project would help underpin investment in both the power plant and the LNG import project. Current gas demand in the south of Chile is no more than 2 million cubic metres (mcm) /day, according to sources, insufficient to justify investment in an LNG regasification project.

Chile’s government is, however, in favour of developing the country’s third terminal close to Concepcion. Energy minister Maximo Pacheco spoke of the potential involvement of ENAP in any southern project when unveiling the country’s new energy strategy in May.

During the same speech, Pacheco also outlined ambitions to make up to 3mcm/day in send-out capacity at the Quintero terminal available to generators currently without access to the terminal. James Fowler