Northern Chile LNG terminal courts generators

OREANDA-NEWS. October 09, 2015. GNL Mejillones, Chile?s underutilized northern LNG terminal, is courting power generators and local industries in a bid to ramp up demand for its regasification services, with an eye toward expansion.

Among the avenues for future growth is power generation to satisfy long-term contracts in the central grid that will be auctioned in second quarter 2016.

A new transmission line that will interconnect Chile?s northern and central power grids will enable generators vying for those contracts to base their plants in Mejillones for the first time.

One big northern gas-based project that could compete in the tender is 760MW Luz Minera, for which Chile?s state-owned oil company Enap is looking for partners. Italian Enel-controlled Endesa is another candidate to participate through its northern generating assets.

The interconnection, scheduled to be completed in late 2017, helps to diminish GNLM?s exposure to fluctuations in the copper price that underpins energy demand in northern Chile?s mining heartland.

But GNLM still depends commercially on France?s Engie, its controlling shareholder with a 63pc stake. GNLM?s 37pc shareholder is Chile?s state-owned mining company Codelco.

Engie controls generator E-CL, which is building the \\$860mn interconnection through its wholly owned subsidiary TEN.

GNLM, first launched in 2010 in a fast-track mode featuring floating regasification, will receive nine cargoes this year, most of which belong to E-CL. The last two cargoes of the year arrive on 16 October and 1 December. A total of \\$750mn has been invested in the terminal to date.

Codelco has also used the terminal to import a few cargoes. BHP Billiton, the main shareholder in the giant Escondida copper mine, will import LNG through the terminal for its 517MW Kelar combined-cycle plant that is due to be completed in late 2016. An LNG supply contract with Spain?s Gas Natural Fenosa kicks in next year.

In an interview with Argus, GNLM chief executive Jean-Michel Cabanes said the terminal will temporarily offer non-binding regasification contracts starting on 1 March 2016 to enable generators to compete in the electricity supply tender next year.

Cabanes highlights GNLM?s commercial transparency, flexibility, open access and strategic location in a protected bay. The expansion of the Panama Canal, which will enable the transit of LNG vessels for the first time, will cut freight time from LNG exporter Trinidad and Tobago to around eight days from a current 19, he says.

Among the commercial provisions offered by GNLM is an option for users to take up to 25pc more supply than their contracted volume, reflecting the facility?s spare capacity.

GNLM is also looking to expand through small-scale LNG, through trucks in the short term and eventually cabotaje vessels to reach other points on Chile?s long Pacific coast, including Punta Arenas in the deep south.

GNLM is in the final stretch of a front-end engineering study (FEED) to expand regasification capacity from a current 5.5mn m?/d (194mn ft?/d) to 8.25mn m?/d through the installation of a fourth train. Depending on future demand, the \\$40mn expansion could be completed in two years, Cabanes says.

A second 180,000m? onshore tank would require an additional \\$150mn, but for now the bottleneck lies in regasification, not storage, he says.

Down the road, the Mejillones terminal could also become a platform for gas or electricity exports to neighboring Argentina.

That country?s watershed decision more than a decade ago to curtail pipeline gas exports laid the foundation for Chile?s LNG imports.

The Mejillones terminal was launched a year after the 2009 start-up of Chile?s main LNG terminal at Quintero on the central coast.

Quintero completed a first 50pc expansion to 15mn m?/d early this year, and is hoping to add another 5mn m?/d of capacity based on demand tied to next year?s closely watched power auction.

US firm Cheniere plans to install a third LNG terminal off the southern city of Concepcion.