Past, present and future of the electricity and gas integration between
Chile and Argentina Hugh Rudnick & Carlos Silva
Boston, July 2016
SummaryAnalyze the love & hate relation between Argentina and Chile in relation to gas and electric interconnections, the history of developments and the opportunities for the future.First, a discussion is made of the gas integration that took place in the late 1990s, with Argentina supplying abundant and economic gas to Chile, with an abrupt closing from 2004, with the lessons learned. An analysis is made of the challenges of the reintegration that is taking place, where Chile transfers electricity as well as imported LNG to Argentina, the operational and economical dimensions, and perspectives for the future, also considering eventual electricity exchanges with Peru.
2
Index• Gas resources in South America• Description of Chilean power market• Gas integration between Chile and Argentina• Gas disintegration• Trying again to integrate• Conclusions & final remarks
3
4
Energy demand in Latin America
MTOE
5
Gas production, consumption & reserves
Source: IEA
6
Gas imports and exports by country
Billion cubicmeters per annum
Source: BP, 2014
Index• Gas resources in South America• Description of Chilean power market• Gas integration between Chile and Argentina• Gas disintegration• Trying again to integrate• Conclusions & final remarks
7
Chile factsPopulation (2014) 17 ,762, 964GDP (PPP) per capita (2014) $14,980
Max power demand SIC (2015) 7,557 MWMax power demand SING (2015) 2,290 MWAnnual energy demand SIC + SING (2015) 66,468 GWh
• Electricity sector reform in 1982• All companies privately owned
8
12,478 60%
6,170 29%
2,374 11%
Thermal
Renewable
Non‐conventionalrenewable
Source: World Bank, CDEC, Systep
SIC+SING installed capacity (June 2016)
21,022 MW
Index• Gas resources in South America• Description of Chilean power market• Gas integration between Chile and Argentina• Gas disintegration• Trying again to integrate• Conclusions & final remarks
9
10
Concepción
Santiago
TocopillaMejillones
Paposo
Punta Arenas
BuenosAires
5 combined cycles2070 MWNorandinoAtacama
SING
SIC5 combined cycles1700 MWGasandesPacífico4 gas distribuitors
Metanex
Investment based onArgentinean gas
MMUS$
7 gaspipes 1.800
10 Combined Cycle plants 1.500
Distribution and industrial 2.200
Total 5.500
Ref.: GasAtacama
Gas integration starts between Argentina & Chile
Gas protocol signed in 1991, modified in 1995, allowing sending gas from Argentina to Chile in favorable conditions, based on a non discriminatory principle. Exports started in 1997
11
0
5
10
15
20
25
dic-
96
abr-9
7
ago-
97
dic-
97
abr-9
8
ago-
98
dic-
98
abr-9
9
ago-
99
dic-
99
abr-0
0
ago-
00
dic-
00
abr-0
1
ago-
01
dic-
01
abr-0
2
ago-
02
dic-
02
abr-0
3
ago-
03
dic-
03
[MM
m3/
day]
Metanex SIPMetanex YPFMetanex PAPacíficoAtacamaNorandinoGasandes
Argentina gas exports to Chile
12
Significant impact on Chile’s electric Mg costs
50
100
150
200
250
300
Ene-
85En
e-86
Ene-
87En
e-88
Ene-
89En
e-90
Ene-
91En
e-92
Ene-
93En
e-94
Ene-
95En
e-96
Ene-
97En
e-98
Ene-
99En
e-00
Ene-
01En
e-02
Ene-
03En
e-04
Ene-
05En
e-06
E07
US$/MWh
SIC
12
Index• Gas resources in South America• Description of Chilean power market• Gas integration between Chile and Argentina• Gas disintegration• Trying again to integrate• Conclusions & final remarks
13
14
•2004 crisis starts with gas cuts
Macroeconomic crisis in Argentina
15
50
100
150
200
250
300
Ene-
85En
e-86
Ene-
87En
e-88
Ene-
89En
e-90
Ene-
91En
e-92
Ene-
93En
e-94
Ene-
95En
e-96
Ene-
97En
e-98
Ene-
99En
e-00
Ene-
01En
e-02
Ene-
03En
e-04
Ene-
05En
e-06
Ene-
07
US$/MWh
SIC
Significant impact on Chile’s electric Mg costs
15
Chile seemed reluctant to further exchanges
16
International agreements proved useless in a critical economic conditionNon discriminatory principle was violatedNot political to cut essential services to the populationSevere impact on Chilean economyEstimated cost of 20 billion US dollars (for more expensive generation)Never to become so dependent
Regasification terminals built at Quintero & Mejillones
Quintero: British Gas (40%), Enap (20%),
Endesa Chile (20%), Metrogas(20%)
In operation from mid 2009 Contracts that start at 6.5
MMm³/day
Mejillones
Quintero
Chile resorts to LNG17
Supply chain for natural gas to Chile
High resultant prices
18
Argentinean gas price was 1.5/MMBtu
Index• Gas resources in South America• Description of Chilean power market• Gas integration between Chile and Argentina• Gas disintegration• Trying again to integrate• Conclusions & final remarks
19
A little bit of history…
• In 1999, as part of Chile‐Argentina gas integration, Chilgener & Termoandes (today AES Gener) decided to export electric energy from Argentina to Chile´s northern system, SING. This exchange operated until 2005
20
A little bit of history…
• In 2013 AES Gener (owner of line) started studies to reactivate the line, but now to transfer electricity from the SING in Chile to the SADI in Argentina
• Argentina had developed its transmission network, but not its generation matrix, so in the last few years its demand has caught up to its generation offer
• In 2015, the government of Chile authorized the export under the principle of “indemnity”
• “Indemnity” implies that operation with exports should not modify the prices at the sending end
21
Operation
• To ensure the “indemnity” of the system, the operator in the Chilean side calculates the dispatch as always
• Generators that were not selected by the dispatch can participate in the export, if they were previously accepted by the line owner (AES Gener)
• AES Gener submits sell offers to the SADI´s system operator, CAMMESA
• The export is triggered if CAMMESA accepts the sell offers for its system, SADI
22
0
500
1.000
1.500
2.000
2.500
3.000 SING ‐‐‐> SADISADI ‐‐‐> SING
46.6 GWh exported
[MWh]
Operation• After a period of tests, export started in Feb 2016• As of April, SING & SADI were 462 hrs. interconnected
23
1.000
1.200
1.400
1.600
1.800
2.000
2.200
2.400
2.600
1 13 25 37 49 61 73 85 97 109 121 133 145 157 169 181 193 205 217 229 241 253 265 277 289 301 313 325 337 349
[MW] Exports to SADI
Internal consumption SING
[h]
Operation24
• During the first period interconnected (February 12th until February 26th), the SING´s generated energy was 821 GWh and the flow to Argentina reached 37 GWh
Operation
• Up to this point, this may look like a good business for private companies, with no real “system” benefits– Idle generators in Chile get to sell their energy– AES Gener gets to charge for its transmission line– TermoAndes (AES Gener) gets to sell energy into Argentina
25
Operation
• However, the integration has very important “system” byproducts:– CAMMESA gets additional energy, that given current generation shortages, it is critical to avoid unserved energy
– SING is also getting a better dynamic response to faults, avoiding unserved energy in the transients (SING has a poor dynamic response, mostly due to the slow response from its coal‐fired plants).
26
OperationEvent 3962 (Nov. 5th 2015): Fault in Generator Angamos 1 with 263 MW‐ Frequency reached 48.8 Hz 3 levels of load shed‐ Loss of 106.2 MW of load Unserved load 48.6 MWh
Event 4052 (Feb. 22nd, 2016): Fault in Generator Angamos 2 with 253 MW‐ Frequency reached 49.71 Hz No load shed
48,60
48,80
49,00
49,20
49,40
49,60
49,80
50,00
50,20
50,40
0 100 200 300 400 500 600 700
Freq
uency [Hz]
Time [sec]
SING Frequency
Evento N° 4052Evento N° 3962
27
Operation
• The integration has very important “system” byproducts:– SING is getting a smoother frequency while interconnected (SADI is ten times bigger than the SING)
28
Operation
• The integration has very important “system” byproducts:– BOTH systems know they can ask for assistance in case of a natural disaster or operational exception.
– In July 2, 2014, the interconnection with Argentina was critical to minimize the consequences of a SING system wide blackout.
29
Chile started exporting gas to Argentina
• Chile agreed to export to Argentina some of the LNG gas it imports
• 5.5 million cubic meters daily (to feed Buenos Aires), implying payments of US$ 180 million per year
• Represents about 20% of LNG imports of Argentina
30
Electric Integration Chile‐Peru
• Chile and Peru are part of SINEA (Andean Community plus Chile), where several interconnection studies have been conducted
• Two interconnections are planned:– Short and thin, between Arica & Tacna (450 MW)– Long and strong, between Crucero & Montavo (1000 MW).
• Integration between Chile & Peru has shown to be more challenging due to geopolitical issues
31
32
Shale gas resources in Argentina
Enormous resources anticipate future important energy exchanges
801.5 trillion cubit feet (tcf)
Chile has 48.5 tcfUS has 622.5 tcf
Index• Gas resources in South America• Description of Chilean power market• Gas integration between Chile and Argentina• Gas disintegration• Trying again to integrate• Conclusions & final remarks
33
Conclusions & final remarks• Regional energy integration provides ample advantages, both
economical and technical• However, geopolitical conflicts are still an issue that limits
integration (Chile‐Bolivia, Chile‐Peru, Peru‐Ecuador)• Although the Chile‐Argentina energy integration seemed
dead, integration advantages are stronger and are driving the market
• Merchant type investors are looking for opportunities• New government initiatives are finding opportunities for
exchanges, with private investors involved
34
Conclusions & final remarks• Regulatory harmonization is an issue that needs
consideration, particularly with existence of non market based schemes
• The principle of “indemnity” and/or subsidies work against market forces
• Probably energy integration will be volume bounded, not to create critical dependences
• The energy integration between countries goes beyond who sells to whom. There is always much more to win for all parties involved.
35
Past, present and future of the electricity and gas integration between
Chile and Argentina Hugh Rudnick & Carlos Silva
Boston, July 2016