Chile diesel demand spikes amid natural gas cuts

By Monica Vargas

VALPARAISO, Chile (Reuters) - Demand for diesel in Chile is skyrocketing as the energy-poor country enters the Southern Hemisphere winter amid cuts in natural gas imports from sole supplier Argentina.

ENAP Chief Executive Enrique Davila said after a meeting with Congress in Chile's port town of Valaparaiso on Wednesday that average diesel consumption spiked 50 percent in 2007 over 2006 and was rising at the same rate this year.

"Last year the rise in diesel demand was 50 percent and in the first five months of this year the rise has been the same again or a little more," said Davila. "We'll have to wait and see what happens in the second semester."

Argentina has limited natural gas supplies to Chile since 2004, and cuts have grown more acute. Last week it cut exports to central Chile completely on Wednesday and Sunday.

Shortages have forced Chilean electricity generators to shift to diesel, dirtier and more expensive than natural gas.

During 2007, diesel demand in Chile was about 1.2 million cubic meters per month, up sharply from about 500,000 cubic meters per month in 2006.

ENAP produces about 350,000 cubic meters per month of diesel, meaning it has to import the remainder.

Meanwhile, a drought depleted levels at central Chile's hydro-electric dams and drove fears of electricity rationing.