Quintero Bay LNG Project, Chile

Chile is not self sufficient in its supply of gas and has always had to rely to a certain extent on its neighbour Argentina for its supplies.

In May 2004, former President Ricardo Lagos asked the national oil and gas company ENAP (Empresa Nacional del Petróleo) to lead an LNG project that would provide the necessary energy independence for the country.


"Quintero Bay comprises basic infrastructure for importing LNG from overseas markets and distributing it in Chile."

This was done following repeated cuts in gas supplies from Argentina with the consequent economic damage to industry and electricity generators which had to resort to more expensive alternative fuels.

The Quintero Bay terminal, which is situated 155km northwest of Santiago, is expected to require an investment of $1.2 billion and will have an overall annual supply capacity of 2.5 million tons of LNG.

QUINTERO LNG PROJECT

The LNG project was promoted by ENAP together with Endesa Chile, Metrogas and BG Group and has consisted of building the basic infrastructure for importing LNG from overseas markets and distributing it in Chile.

The project has included the installation of a sea terminal to receive LNG from tanker ships and a plant for regasifying and distribution through pipelines in central Chile. The project began construction in May 2006 following the approval of the environmental impact assessment, granted by CONAMA (the Chilean environmental authority) in November 2005.

GNL Quintero SA is a joint venture between Endesa Chile (20%), ENAP (20%), Metrogas Chile (20%) and BG Group plc (40%) formed for the LNG project. The companies directly involved in the project will operate through two subsidiary companies: one owning the Quintero sea terminal (Quintero) and the other responsible for LNG purchases and its sale to the country's consumers (GNL Chile).

SUPPLIES

The new terminal will initially regasify 10Mm³/d when operations begin in 2009 with a final maximum level of 15Mm³/d. Endesa, Metrogas and Enap will purchase initially as per agreement at least 6.5Mm³/d of natural gas, which includes volumes that will in turn be resold to the local distributors GasValpo and Energas.

CONSTRUCTION

Chicago, Bridge and Iron (CB&I) were awarded the construction contract by GNL Quintero SA to build the LNG regasification terminal at Quintero Bay. The construction contract was valued at approximately $775 million.

"With the start of operations, the Quintero Bay regasification plant will provide some 30 jobs directly and another 100 indirectly."

CB&I's scope included the engineering, procurement and construction of a regasification and sendout system, a new marine jetty with complete ship unloading facilities, two large full containment LNG storage tanks and a smaller storage tank.

The LNG terminal was constructed on the land of ENAP Refinerías SA in Quintero Bay (El Bato sector). The complex comprises a quay approximately 1,300m long, unloading arms, two storage tanks of around 160,000m³ capacity each, two small storage tanks of 10,000m³ capacity and a vaporisation station.

During the construction stage, the project has employed an average of 400 people and a peak number of 800. With the start of operations, the plant will provide some 30 jobs directly and another 100 indirectly.

LNG DISTRIBUTION

The project will supply natural gas to the country at competitive prices and constantly, whether by feeding combined-cycle generating plants, industrial boilers or commercial and residential consumption, through Metrogas, Energas and GasValpo.

These distribution companies have confirmed their interest in LNG supplies, while ENAP's own Aconcagua refinery will require LNG for its own operations. This represents a demand for around 1.7 million tonnes a year.

"The terminal is expected to provide 40% of the Chilean gas demand and be online by winter 2008."

BG Group, which is part of the consortium, was chosen in early 2006 to negotiate gas supply contracts and will provide 1.7 million tonnes per annum of LNG over a 21-year supply contract via its own fleet of ships (gas supplied from Nigeria or Equatorial Guinea).

Enrique Dávila Alveal, the chief executive of ENAP, has said that the LNG terminal 'will not be a back-up for when supplies of other conventional products fail but will become a secure, stable and permanent source feeding the energy matrix every day of the year'.

The terminal is expected to provide 40% of the Chilean gas demand and was to be online by winter 2008. The terminal owners have invoked a fast-track supply option so that the terminal comes on line earlier, in a temporary capacity, than the previously agreed 2009).In March 2007, it was reported that the terminal would come on-stream in April 2009, not by late 2008 as previously thought. The fast-track option for temporary supplies is now not guaranteed even thought there is a desperate demand for gas in Chile. The Chilean government acting through the state copper concern Corporacion Nacional del Cobre, is also demanding the introduction of LNG as the main fuel for the northern mining belt of the country and this is also expected to begin in 2009.

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