BMI View: Given a lack of below-ground potential, Chile suffers from a severe deficit of hydrocarbon supplies and a high dependence on imported energy feedstock. Chile's most immediate opportunities lie in the expansion of their liquefied natural gas (LNG) import facilities as a means to meet growing domestic demand . On a longer-term basis, Chile is exploring the possibility of tapping is unconventional resources in the Magallanes region, though we caution its development has grown increasingly unlikely amid a lower oil price environment.
|e/f = BMI estimate/forecast. Source: BMI, EIA|
|Crude, NGPL & other liquids prod, 000b/d||10.6||8.9||8.9||8.9||8.9||9.0||9.0|
|Refined products production & ethanol, 000b/d||199.0||201.0||203.0||205.0||208.1||211.2||214.4|
|Refined products consumption & ethanol, 000b/d||340.0||348.5||357.2||367.9||379.0||390.3||404.0|
|Dry natural gas production, bcm||0.9||0.9||0.9||0.9||0.9||0.9||1.0|
|Dry natural gas consumption, bcm||4.7||4.8||4.9||5.1||5.3||5.4||5.6|
Key trends and developments in the Chilean oil and gas sector are:
Chile's attractive fiscal regime, favourable regulatory environment, and stable macroeconomic growth have been unable to spur significant investment into the country's oil and gas sector due to poor below-ground rewards. Chile has experienced varying degrees of output growth over the past several years, and while the country is making broad efforts to expand capacity, we forecast only slight growth over the next decade.
Returning to power after a one-term hiatus, centre-left President Michelle Bachelet unveiled a new national energy strategy in the spring of 2014, allocating USD650mn in capital spending plans. . Bachelet has announced plans for national oil company Empresa Nacional del Petroleo (ENAP) to lead the construction of a new LNG receiving terminal in the south-central area of the country, seeking international partners for the country's fourth facility. The 2014-2025 Strategic Plan also includes increased efforts to expand tight oil and shale gas exploration, particularly in the southernmost Magallanes region.
With in-situ proven crude oil reserves of 147.8mn barrels (bbl) in 2015, Chile is among the smallest upstream markets within thin region. As such, rising domestic demand for refined fuels will maintain a large deficit in refined fuels products. Moreover, total crude oil reserves are depleting at an average rate of 1.5% a year. By 2024, we estimate Chile's crude reserves will stand at only 137.7mn bbl in reserves.
Low below-ground rewards also extend to the gas sector. Chilean in-situ domestic gas reserves are projected to decrease from a modest 98.0bcm in 2015 to 94.3bcm in 2024. By the end of our forecast period, Chile will only be able to supply 15% of its gas requirements from domestic sources. Moreover, natural gas imports are projected to rise from 4.19bcm in 2015 to 6.97bcm in 2024, making up over half of the country's total demands.
Nearly 95% of all fossil fuels are imported from abroad. Weak upstream development means Chile's oil and gas sector is unlikely to markedly improve this trend in the coming years. We estimate crude imports will increase at an average rate of 1.4% per year from 194,000b/d in 2015 to 222,000b/d in 2024. Similarly, fuels imports are projected to increase at an average rate of 6.0% y-o-y over the next decade amid rising consumption from lower oil prices.
ENAP's three refineries have a booked refining capacity of 226,000b/d with a current utilisation rate of 74% which supply approximately 60% of the country's total needs. As the primary source of the company's revenue, contributing a reported 93% of total revenue, ENAP is also targeting the modernisation of the three facilities with hopes of increasing total output. The company is currently producing 52% of the country's daily needs, meaning imports are required to make up the shortfall. In an effort to improve utilisation rates and produce more high-end products such as jet fuel and gasoline, ENAP has been experimenting with new light crude supplies from Canada and Angola.
Estimates vary widely on potential, but Chile's unconventional hydrocarbons in the southernmost Magallanes region pose upside risk to overall output in the long-run. After ENAP announced the successful drilling of a shale gas well in Tierra del Fuego in July 2013, momentum to increase production has largely subsided. Notably, ConocoPhillips committed to expanding exploration efforts in the region in August 2014 with hopes of discovering untapped hydrocarbon potential. However, sharply falling oil prices have significantly undermined the prospects for upstream development of this frontier region as companies face lower profitability and reduced capital expenditure budgets.