British Gas hits tough times in South America

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The Independent Online


British Gas's multi-billion-pound plans for expansion in Latin America are under severe pressure as its projects in Chile and Argentina are buffeted by competition and those in Bolivia, Brazil and Colombia by political and commercial uncertainties.

British Gas has been working with a US partner Tenneco on the $865m TransGas scheme to bring gas across the Andes from Argentine Patagonia to southern Chile and eventally to Santiago. The city of five million people is the capital of a country whose economy grew at around 8 per cent last year and where explosive economic growth is expected to lead to a doubling of electricity generation within the next 10 years.

Although the pipeline plans were well known last year no important construction work has started on the line and British Gas has not announced any deals with potential customers in Chile.

Building began last October on a much shorter $284m rival line, GasAndes, from the Argentine city of Mendoza, directly across the mountains from Santiago. It should be finished in May 1997, possibly before the British Gas/Tenneco line arrives and will provoke stiff competition and much-reduced prices.

GasAndes is a joint venture between Chilgener, a Chilean power company, the Nova Corporation of Canada and other companies and has already announced initial deals to supply four gas-fired generation plants near the capital.

"I think GasAndes has stolen a big march on TransGas and I don't kow if they will be able to catch up", said one leading Chilean banker here yesterday.

George Ferguson, local British Gas manager, told the Independent that contracts would soon be announced and that the TransGas line could be built faster than the rival line as TransGas goes over lower mountain altitudes. He also cast doubt on GasAndes's ability to provide the assured volumes that he claimed his project could provide. "TransGas plans to sell 90 billion cubic metres of gas over 25 years," he said.

He rejected reports there that British Gas will accept operating a loss- making operation in Chile to secure its place in the region.