Shipments of LNG to northern Chile will rise more than 40% this year as a new gas-fired thermoelectric plant begins supplying electricity to local copper mines, GNL Mejillones CEO Jean-Michel Cabanes said Friday.
With the start of the plant, the Engie-controlled Mejillones LNG terminal is scheduled to receive 10 cargoes this year, up from seven in 2016, Cabanes told S&P Global Platts. That represents around 50% of the terminal's 5.5 million cu m/d operating capacity, he said.
The 518-MW Kelar combined-cycle plant began commercial operations in late December. Built and operated by Korea Southern Power Co. and Samsung C&T, the plant will supply electricity to BHP Billiton's copper mines in the region, including the giant Escondida pit, the world's largest by production.
Construction of the $600 million plant began in August 2014 and was connected to the grid in June last year. Commercial operations began December 27th, BHP Billiton said Thursday.
The plant was initially expected to provide additional baseload capacity to meet rapidly rising demand from Chile's mining industry.
However, the halving of the price of copper price, the country's main export, between 2011 and 2016, leading the cancellation of numerous mine projects, as well as the rapid development of solar and wind capacity as left the Kelar plant facing a radically changed scenario.
"The plant will not be running at full capacity as downstream consumption is not as high as was expected five years ago," Cabanes said.
In a statement Thursday, BHP Billiton said the Kelar plant will offer greater stability to the power grid by displacing more expensive generation unit and allowing a better integration of intermittent renewable energy sources.
"This will make the grid not only more secure, but more competitive and diversified," BHP Billiton said.
During the first 11 months of the year, LNG accounted for 9% of electricity generated on northern Chile's SING grid, compared to 78% from coal, 6% from diesel and 4% from PV solar.
BHP Billiton-controlled Minera Escondida signed the long-term supply contract with Gas Natural Fenosa in May 2014 following a tender process. The gas is sold on a delivered ex-ship basis. At the time, BHP Billiton said that the gas would be supplied from the Sabine Pass liquefaction facility in Louisiana.
The Escondida mine, in which Rio Tinto and Japanese investors also own stakes, produced more than 1 million mt/year of copper in cathode and concentrates in 2015. It joins power companies ENEL Generacion (formerly Endesa Chile) and Engie-controlled E-CL has regular clients of the terminal.
GNL Mejillones' schedule is also based on state energy company ENAP renewing a contract with Argentinian counterpart Enarsa to export gas imported as LNG as Chile over the Andes.
Last year, Engie exported the equivalent of one LNG cargo delivered to Mejillones to northwest Argentina via the NorAndino pipeline, roughly 1 million cu m/day between May and August.
Last month, Argentina's energy minister, Juan Jose Aranguren, said Enarsa was studying a proposal from ENAP offering similar conditions to those agreed in 2016.
"We hope to export at least one cargo again to Argentina this year," Cabanes said.
