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BMI View: Chile's small resource base makes the country heavily dependent upon imports to satisfy
demand and promote economic growth. Indeed, Chile in 2011 had to import 97% of total oil needs and
66% of its natural gas requirement. These issues will persist in spite of some long-term upside potential
stemming from the country's shale gas prospects. In the meantime, imported liquefied natural gas (LNG)
will play a greater role in energy security.
The key trends and developments in the Chilean oil & gas sector are:
?? In terms of domestic production, we forecast both oil and gas to rise moderately in the coming
years, with oil production increasing at an average of 1.8% through to 2021 and natural gas
increasing at an average rate of 1.05% through to 2015 and then to decline thereafter. At the
same time, Chilean consumption of oil and natural gas will steadily increase, adding additional
pressure on the government and state-owned Empresa Nacional del Petróleo (ENAP) to
increase imports. Indeed, due to the country's small resource base, Chile in 2011 had to import
97% of total oil needs and 66% of its natural gas requirement.
?? Today, two LNG import terminals service different regions of the country. The Quintero
regasification terminal provides natural gas to the majority of the country's population, while the
Mejillones terminal is well positioned to service the lucrative Chilean copper mines in the north.
Due to the energy intensity of the copper industry, there is significant interest in expanding the
capacity at Mejillones up from its current annual capacity of 2.0bn cubic metres (bcm).
?? Chilean power generators Colbun and AES Gener have selected Bermuda-registered Hoegh
LNG to install a new floating storage and regasification unit (FSRU) in Chile. The term of the
contract is 10 years, with an optional extension of five years. The FSRU, which will be situated
in Quintero Bay, will supply AES Gener's power plants in the country with natural gas. The
scheduled start-up of the project is late-2014. The transaction is subject to completion of final
documentation and board approval from both parties.
?? In terms of consumption, we forecast that oil use will rise from an estimated 332,400 barrels per
day (b/d) in 2012 to 345,700b/d by 2016. It will continue to increase steadily at an average rate
of 1.8% through to 2021. If Chile is to boost oil production, its best hope lies in exploration
taking place in the Magallanes region in the south of the country. We are also forecasting gas
consumption rising from an estimated 6.1bcm in 2012 to 9.8bcm by 2021.
The advent of technology capable of extracting oil and gas from shale formations has given Chile reason
for optimism over the long term. Although still very preliminary, the EIA estimates that Chile's oil and
gas producing Magallanes region may also contain 1,812.5bcm of technically recoverable shale gas
resources. Should even half of these estimated resources become economically recoverable, the amount of
gas produced would be sufficient to meet a 7.9bcm/year consumption rate for approximately 115 years.
Although we have not taken shale gas production into account in our forecasts, it remains a significant
upside risk in the long term. Indeed, the Chilean copper mining industry has already expressed interest in
utilising shale gas to power production.