OREANDA-NEWS. May 26, 2017. The second expansion of Chile Quintero LNG terminal has effectively derailed after the sole remaining participant signed a long-term supply deal with one of the incumbent offtakers.

Chilean generator Colbun today announced an agreement with state-owned oil company Enap, one of Quintero three existing offtakers, for 12 years of gas supply tied to reserved regasification capacity, starting in January 2019.

The contract entails a minimum payment of $400mn, Colbun and Enap said.

Enap already supplies Colbun under a short-term contract that expires at the end of 2018.

Colbun, owned by the Matte family, uses the gas to supply its 875MW Nehuenco thermal generating complex in Quillota, in the central region of Valparaiso.

The new deal effectively short-circuits a $250mn project to expand the Quintero terminal regasification capacity by 50pc to 20mn m?/d, from a current 15mn m?/d, and add a third 160,000m? storage tank.

"There will be no expansion for the timebeing, and I do not think it is going to happen anytime soon," an industry executive not directly involved in the project told Argus. Another industry source said Enap direct offer was a more competitive option for Colbun.

Colbun was among three companies that originally committed to reserving a total of 3.2mn m/d of regasification capacity at Quintero in a second open season that began in late 2014. By March 2016, only two of the three companies signed non-binding 20-year agreements: Colbun for 1.65mn m/d and fellow generator AES Gener for 1.45mn m?/d. The third party in the original group, Israeli IC Power Cerro el Plomo, dropped out. AES Gener unofficially pulled out of the project earlier this year.

Colbun and AES Gener were part of an even-earlier pool of offtakers for Quintero when the project was first conceived in the mid-2000s, in response to Argentina?s curtailment of pipeline gas exports. The two generators later withdrew and went on to build coal-fired generating capacity that was seen as more economic than gas.

GNL Quintero could not be reached for comment on the status of the expansion project. GNL Chile, the commercial entity representing the offtakers, declined to comment.

The central coast terminal, which was launched in 2009, has been operating a close to capacity since a first 50pc expansion was completed in early 2015. A total of 49 cargoes were received in 2016, up from 40 in 2015. The preliminary delivery program for 2017 encompasses 46 cargoes.

The existing offtakers are Enap, Spain Gas natural Fenosa distribution unit Metrogas and Italy Enel.