IEA presents report on Chile’s capacity to respond to energy supply emergencies

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Recommendations range from encouraging more domestic production of oil to strengthening the independence and objectivity of the electricity system operation

18 July 2012

The International Energy Agency (IEA) has produced a report which looks specifically at Chile’s ability to respond to short-term emergencies in oil, gas and electricity. The report contains a series of recommendations, including clarifying procedures for relaxing fuel specifications in a crisis; building up stocks of liquefied petroleum gas throughout the supply chain; and reviewing regulatory and operational responsibilities to improve the timeliness and effectiveness of decision-making in response to emergencies.

Chile, which is currently a candidate country of the IEA, has experienced several serious energy supply incidents over the last decade, including droughts, a sustained gas supply cut from Argentina since 2004, and a major earthquake in early 2010 which affected electricity networks and refineries, and caused several blackouts.

IEA reports such as this focus on a lengthening list of non-member countries. This increasingly global engagement is an integral part of the Agency’s efforts to provide all stakeholders – from policy makers to business leaders – with a truly global view of the world’s energy system.

The report is based on an IEA Emergency Response Assessment carried out in 2010 and 2011 following a request by the Chilean government. Ambassador Richard Jones, IEA Deputy Executive Director, and Cuauhtemoc Lopez-Bassols, Analyst (Emergency Response) at the IEA, co-presented the report on 11 July to stakeholders from the Chilean Energy Sector in Santiago.

“The Emergency Response Assessment represents a very important milestone in the relationship between Chile and the IEA,” said Ambassador Jones.

Oil

With national oil production in Chile only accounting for 2% of its total oil consumption in 2010, the report commends the wide diversity of import sources Chile relies on for its crude oil and oil products.

The Ministry of Energy (MoE) is also complimented in the report for its efforts to develop an effective market monitoring system for oil supply and demand to provide data essential for understanding and addressing supply disruptions. Other efforts by the MoE include commissioning studies on the possibility of meeting the IEA’s 90-day stockholding obligation and on demand restraint measures.

The IEA report contains several recommendations such as encouraging more domestic production of oil in order to boost energy security and clarify procedures for relaxing fuel specifications in a crisis.  

Gas

The IEA report also praises the development of two Liquefied Natural Gas (LNG) terminals within a short period of time. LNG – natural gas that has been liquefied for transport – provides another useful source of energy security because it is easy to transport and store.

Recommendations in the IEA report range from focusing on further analysis of unconventional gas prospects in the country to investigating the potential storage capacity of trans-Andean pipelines which are underutilised at present. The report also recommends increasing LNG import capabilities and building up stocks of liquefied petroleum gas throughout the supply chain, in order to better cope with future supply emergencies.

Electricity

The positive steps taken to diversify the electricity generation mix in Chile – especially through the deployment of new renewable energy technologies – are highlighted in the report.

The report, however, recommends that the independence and objectivity of the electricity system operation could be strengthened by reforming governance and funding arrangements in order to remove conflicts of interest.

The report also proposes reviewing and clarifying regulatory and operational responsibilities to improve the timeliness and effectiveness of decision-making in response to emergencies.

Looking ahead, the report provides many possibilities for further co-operation between the IEA and Chilean energy ministry. For example, the IEA will provide advice during the preparation of an exercise to test the national emergency communications channels, which was one of the review team’s recommendations.

Click here to read Oil and Gas Emergency Policy – Chile 2012 update.

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