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Lagniappe
Cold
snap prompts Chile to seek gas deal with old foe Bolivia
Jose
Luis Quintana/Reuters
Bolivia:
Chilean Minister of Energy Marcelo Tokman walked with Bolivian
counterpart Carlos Villegas in La Paz on July 30. Tokman discussed
future gas sales by Bolivia to Chile.
By
Matthew Malinowski
A
South American cold snap is causing Chileans to pay up to
four times more for heat and electricity, and
could spur the government to speed reconciliation with its
bitter – but gas-rich – foe, Bolivia, observers
say.
As temperatures dropped to near-record lows in recent weeks,
neighboring Argentina has had to cut off some gas shipments
to Chile in order to meet its own domestic demand.
Now, an increasingly disgruntled Chilean public is pressing
the government to seek gas deals with other countries, including
Bolivia.
"I believe that we need to leave behind these historic
feuds once and for all and start an open and frank dialogue
with Bolivia," said Chilean senator Nelson Ávila
after the latest round of gas cuts last month. "Bolivia
has some of the largest natural-gas reserves on the planet,
and we could easily benefit from them."
In 1995, Argentina promised a cheap, steady supply of natural
gas to satisfy Chile's residential, industrial, and electricity-generating
needs.
Still, what was then perceived to be the cure-all to Chile's
energy woes has since morphed into one of the country's biggest
problems. Today, Chile imports nearly 100 percent of the commodity
from its Andean neighbor. This winter's cold temperatures have
exposed this dependency.
"Depending on Argentina is wishful thinking; they do
not even have enough gas to meet their internal demands," Eduardo
Frei, president of the Chilean Senate, told reporters recently.
In response to the shortages, many Chilean businesses, particularly
electricity-generating companies, have reluctantly switched
to diesel fuel. The situation reached a low point in June,
the first month since the 1995 agreement that Chile used no
natural gas to generate electricity. Diesel costs up to four
times as much as natural gas and pollutes far more.
The consequences have been disastrous: electricity bills have
risen sharply. Some industry analysts expect them to rise by
as much as another 13 percent by winter's end.
Additionally, Santiago, the country's capital and largest
city, has experienced a sharp spike in air pollution, including
its smoggiest day since 1999.
New solution with an old foe?
In light of the increased pressure to find new energy sources,
the Chilean government has begun to explore purchasing natural
gas from neighboring Bolivia.
On the surface, this partnership seems like an ideal match.
Chile needs natural gas to satisfy internal demands.
Bolivia, which has South America's second-largest natural-gas
reserves, also stands to benefit from better ties: The country
is seeking more potential gas customers as well as foreign
investment to help modernize its gas-industry infrastructure.
But the two countries have a long legacy of diplomatic feuds.
Chile and Bolivia have had icy relations since the War of
the Pacific in 1883. At that time, Chile took Bolivia's access
to the Pacific Ocean, a loss that soured relations. Diplomatic
ties were eventually broken off in 1978 over Bolivia's insistence
on regaining access to the sea.
'First step toward reconciliation'
In spite of this sensitive history, relations between the
two nations have thawed in the last year. Since Chilean President
Michelle Bachelet and her Bolivian counterpart, Evo Morales,
assumed their respective positions in 2006, officials from
both countries have tried to boost dialogue and reconciliation.
The latest sign of rapprochement came last week, when Chilean
Energy Minister Marcelo Tokman and Bolivian Hydrocarbon Minister
Carlos Villegas met in Bolivia's capital, La Paz, to discuss
energy integration.
The two ministers discussed cooperation on geothermal energy
at length. But they decided to put off detailed discussions
about gas until a later date, which has not yet been set.
Chilean politicians and officials have spoken out in favor
of the renewed dialogue.
"I think that last Monday's meeting was a very important
first step toward reconciliation," says Paula Vasconi,
an official at Terram, a Chilean think tank that promotes environmental
protection and sustainable development.
Still, Ms. Vasconi went on to vocalize Chilean concerns over
the talks' most serious sticking point: Bolivia's territorial
demands. Chile has tried to keep its energy discussions separate
from landlocked Bolivia's desires for sea access, and this
could represent a point of contention in future negotiations.
"I think that these talks could lead Chile and Bolivia
to establish diplomatic relations once again," says Vasconi. "But
it all depends on how Bolivia deals with the sea access issue.
If things with that issue do not get too complicated, then
there could be very positive results."
Temperatures go down, prices go up
This winter, Santiago's Meteorological Association has recorded
some of the coldest temperatures since 1984. In early July,
temperatures dropped to as low as 23 degrees F. in Santiago's
outlying Pudahuel neighborhood.
The Nation Energy Commission (CNE) warned Chilean consumers
in late July that their electricity bills will rise another
6 to 7 percent in August.
Also, some industry sources say higher generation costs could
translate to higher electricity bills through October.
Chilean
Finance Minister Andrés Velasco announced that
the government will distribute funds to the poorest 40 percent
of the Chilean population in order to defray the higher costs.
Each family will receive 800 pesos ($1.40) in two installments.
According to Mr. Velasco, this plan will cost the government
more than 800 million pesos ($1.55 million).
But these payments only go so far; for 140 kilowatts of electricity,
monthly electricity bills can easily reach as high as 20,000
pesos ($39) in parts of southern Chile.
For most Chileans, it is becoming more clear that maintaining
the status quo is not viable.
"It is horrible. Electricity prices have been going up
for a while," says Santiago resident Hugo Velasquez.
"If you look at my past few energy bills, they have gone
up considerably for the past two or three months … and
now I have to reach a special agreement with the company on
how to pay because, if you are late on making your payments,
they charge you even more," says resident Carlos Larrain.
"The government is getting used to making decisions in
its technocratic circle without taking into account the problems
which affect normal people," said Senator Ávila.
But that could be changing.
"The pressure put on the government has undoubtably pushed
it to look to Bolivia as a source [for gas]," says Vasconi. "The
faster Chile reaches an agreement with Bolivia, the faster
Chile can opt for this new energy source for the country."
Matthew
Malinowski is
a contributor to The Christian Science Monitor and wrote
this story in Santiago, Chile. Petroleumworld
not necessarily share these views.
Editor's
Note: This commentary was originally published by The Christian
Science Monitor, on the August 8, 2007 edition.
Petroleumworld reprint this article in the interest of our
readers.
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