Diesel, Natural Gas Demand Soaring in South America
Energy planners in Argentina, Chile, and Brazil are scrambling to deal with something they hoped to avoid this decade: drier-than-normal weather. Although the countries have plans to diversify their electric generation portfolio, their grids remain highly dependent on hydroelectricity. And natural gas supplies in the region are strained. As a result, power prices are high and many natural gas-fired generators are instead being run on more expensive diesel fuel. While Brazil may avoid rationing and outages, industries in Argentina and Chile may face significant power cuts.
Climate specialists blame the dry weather on the phenomenon of La Ni~na, which cools waters in the Pacific and subsequently creates a drying effect in South America. In Brazil, where generation capacity is more than 80 percent hydro, Petrobras has diverted natural gas supplies to generators – much to the annoyance of some city gas distributors, who have seen supplies suffer as a result. The situation in Chile is even more precarious, as it is relies on increasingly scarce imported gas from Argentina. That in turn has increased prices on the central grid, which is 55 percent hydro and supplies the bulk of the country’s population. The northern grid in Chile’s desert north, home to the world’s largest copper mining industry, is no better off, as some 55 percent of its power is gas-fired.
Argentina can offer little help, as it is suffering natural gas shortages of its own due to falling domestic production and reduced imports from Bolivia. Government efforts to reduce power consumption have had limited impact in the humid summer months.
Things are looking better in Brazil, however, where hydrology has picked up in recent weeks, and the newly opened 194 million cubic feet per day Cabi’unas-Vit’oria natural gas pipeline has started providing fuel for about 1 gigawatt of generation capacity. In addition, the LNG regasification terminals in Ceara and Rio de Janeiro states are due to start operations in July and September, respectively.
But Chile’s LNG regas terminal in the central region won’t start operations until the second quarter of 2009, meaning the country will continue to rely heavily on diesel to fire generators. The heavy fuel, which stresses equipment designed to run on natural gas, is being blamed for problems at power generator Colbun’s 368 megawatt Nehuenco 1 plant, which will remain offline for several months due to a fire in December. If another major generator goes offline, rationing may be unavoidable, according to the government. Meanwhile, officials are calling on residents to conserve power and are hoping for a wet winter.
Argentina has already suffered a few power outages, although the government blames them on problems with transmission networks, not generators. Officials plan to bring 1 GW of new capacity online this month, which should help avert additional power cuts. But if the deadline slips, as it often does, President Christina Kirchner’s new government may face some embarrassing power shortages.