OREANDA-NEWS. Chile will begin unprecedented pipeline exports of natural gas to Argentina starting next week with the aim of meeting peak wintertime demand for a three-month period.

Argentina agreed to pay $7.2/mn Btu, or a total of $73.4mn, to a group led by Chile's state-owned Enap for a total supply of 276mn m3 from the Quintero LNG terminal, utilizing the 9mn m?/d GasAndes pipeline that once carried Argentinian gas to Chile.

Separately, Argentina will receive 86mn m3 through Chile's underutilized northern Mejillones LNG terminal and the corresponding 7.1mn m?/d Norandino pipeline as part of a $22.5mn contract with Engie subsidiary Solgas, for an average price of $6.9/mn Btu.

The total supply is equivalent to around six LNG cargoes.

The exact date of the launch of the cross-border gas supply for the May-August period will depend on Argentina's daily nominations.

GasAndes and Norandino are part of a series of cross-border pipelines that used to transport Argentinian gas to Chile, but supply dwindled after Buenos Aires decided in 2004 to give priority to its domestic market.

Once a reliable gas exporter for the Southern Cone, Argentina now imports pipeline gas from Bolivia at around $3/mn Btu and LNG through two terminals in Buenos Aires province at around $6.5/mn Btu.

The price for the Chilean gas is related to diesel, rather than waterborne LNG.

"Bolivia sells to Brazil and Argentina, but has no more gas to sell us," energy minister Juan Jose Aranguren said today, explaining why the country would buy more expensive gas from Chile.

Also, Argentina's LNG terminals, at Bahia Blanca and Escobar in Buenos Aires province, are at full capacity in winter months, Aranguren said.

"Therefore, the alternative was …diesel, which is expensive, at $10.5mn Btu, [compared with] this opportunity from Chile," Aranguren said.

Argentina's thermal plants often burn diesel during the winter, when Argentina routinely suspends industrial gas supply to favor residential consumption that relies on the fuel for heating.

Buying gas from Chile will end up saving the country $46mn, Aranguren said.