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Chile to Build Third Gas Terminal to Contain Power Prices

May 15 (Bloomberg) -- Chile’s President Michelle Bachelet plans to build a third natural-gas import terminal and step up incentives for renewable projects in a bid to rein in surging power prices in the top copper-producing country.

Announcing her 2014-2018 energy program, Bachelet said the government will inject $400 million into Empresa Nacional del Petroleo and charge the state-owned company to lead development of a new liquefied natural gas terminal in central-southern Chile. It will also spend $250 million directly over four years.

The government will rely on LNG to ease the cost of power, the most expensive in Latin America. A $5-a-metric-ton carbon emissions tax proposed in March will punish coal-fired power and encourage gas-fired stations that today are a fifth more expensive, according to AES Gener SA, the country’s second-biggest power provider. Chilean gas prices aren’t regulated and the government will consider setting tariffs.

“There are no magic recipes to resolve the energy situation,” Bachelet, who began her second term as president in March, said today in a televised speech.

While Chile isn’t facing blackouts, it needs more contributors to the grid and diversification of sources to avoid increases in costs of about 34 percent over the next decade, she said. The government wants to reduce spot power prices by 30 percent and reduce residential bills by 20 percent.

Authorities will play an active role in issuing permits for projects and involve communities from an early stage to avert legal disputes, she said. The country needs to accelerate renewable power investments, increase the use of solar panels and connect the two grids, Bachelet said.

Shale Boom

Bachelet is pinning hopes on surging LNG supply from the U.S. shale gas boom and lower prices to provide the fuel Chile needs to ensure its mining industry stays competitive. Mining companies from Anglo American Plc. to Teck Resources Ltd. have postponed $43 billion of projects as they weigh rising costs and declining copper prices, according to the National Mining Society, an industry lobby group.

She will travel to Washington next month to meet with U.S. President Barack Obama on an official visit where energy cooperation will be on the agenda, according to a statement from the U.S. Embassy in Santiago.

In today’s speech, Bachelet made no reference to hydroelectricity, which accounts for more than half of the central grid’s power. She said earlier this year that the stalled HidroAysen project isn’t viable in its current form.

Chilean power prices have doubled in the last seven years and could increase 30 percent in the next seven, Energy Minister Maximo Pacheco said today in televised remarks.

“We are behind and we are catching up,” Pacheco said. “Without energy, it’s not possible to offer Chilean people the wellbeing they need.”

To contact the reporter on this story: Matt Craze in Santiago at mcraze@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Stephen Cunningham

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