Chile faces tight 2008 energy outlook: minister

SANTIAGO, Dec 19 (Reuters) - Chile will likely face more energy shortfalls in 2008 if dry weather conditions and cuts in Argentine natural gas shipments persist, Energy Minister Marcelo Tokman said on Tuesday.

Chile's energy costs have risen sharply this year as scant rainfall reduced hydroelectric reservoir levels and cuts in natural gas shipments from Argentina forced generators to use costlier and dirtier diesel fuel.

The situation was further complicated by cold snaps in the winter months and subsequent generator maintenance problems related to the use of diesel fuel instead of natural gas.

"It seems like a joke, but everything that could have gone wrong did," Tokman told reporters.

Even though he sees energy demand growing more slowly in 2008 than the increase in production capacity, Chile's situation next year could be challenging.

"The truth is that if climate conditions don't change and if shipments of natural gas from Argentina don't change we're going to face another difficult year."

But Tokman also said Chile will be better prepared for energy shocks in the future as it diversifies energy sources and adds capacity.

The government has several regasification (LNG) projects underway in central Chile, while state-owned copper giant Codelco and Franco-Belgian utility Suez (LYOE.PA) are jointly executing a project in the northern mining region.

Chile is also promoting renewable nonconventional energy sources as part of its diversification strategy.