Indonesia offers to sell LNG to Chile

Visiting Chilean president said on Wednesday that Indonesia is offering to supply LNG to Chile to reduce its dependence on Argentine gas, media report said.

President Ricardo lagos in its written statement said that it would continue negotiation with Indonesia regarding joint venture possibility between both countries? state energy enterprises as well as possibility to supply gas to Chile. ident Megawati Sukarnoputri.

"The possibility of importing Indonesian natural gas in the medium term would solve the (problem of) dependence on Argentine gas, introducing greater reliability for the whole country's energy system," the statement said.

If that happens, it would be the second time Indonesia benefits from domestic issues preventing a Latin American country from capitalizing on its natural gas resources. Last December, the Asian country secured a deal to export to the U.S. after Bolivia failed to deliver on a similar deal owing to domestic political turmoil.

On Wednesday, Lagos issued a veiled warning to Argentina that it threatens to lose the most important market for its gas exports.

"Indonesia just recently concluded an accord to supply gas to the U.S. - to the state of California - and the corresponding investments are going ahead," he said, alluding to Bolivia's lost opportunity.

Argentine gas normally fuels some 30 percent of Chilean power generation. Chile is the destination of about 90 percent of Argentina's natural gas exports.

In late March, Argentina froze natural gas exports at 2003 levels to stop a looming domestic energy crisis, while demand both there and in Chile has grown strongly and stands to continue increasing as both countries head into the Southern Hemisphere's winter season, which this year has begun unusually early.

The resulting 20 percent shortfall in gas exports to Chile - starting at 3.3 million cubic meters a day - has left energy companies and politicians scrambling to replace the gas with other fuels.

Bolivia recently agreed to sell natural gas to Argentina to offset some 5 percent of Argentina's gas needs in the near term. As part of the deal, Bolivia forced Argentina to agree to keeping its limits on gas exports to Chile - further alienating the two countries from Chile.

Despite Lagos' warm welcome for the Indonesian offer, he acknowledged it will take time for an agreement to take effect. "We'd have to undertake deeper studies and see what the possibilities for financing are for this project," Lagos said.

Any deal with Indonesia would demand significant investments in infrastructure as the gas would be imported in liquefied form from across the Pacific rather than piped across the Andes. (*)