As a part of ADI’s on-going series of blogs covering refining and fuel demand across major Latin American countries, so far we have covered Brazil and Mexico. This blog series draws on our extensive research and consulting on refining in Latin America from our recent multi-client study, “Market Outlook for U.S. Refined Products Exports to Latin America”. In today’s blog, we will be covering Chile, which is another major country highly dependent on imports especially from the U.S. to meet its fuel demand.
Road transportation accounts for over half of fuel demand in Chile followed by the industrial and building sectors. Diesel has accounted for ~48% of fuel demand in Chile followed by gasoline and LPG over the past five years (Exhibit 1). Fuel demand in transportation, power generation, and building heating will continue to grow supported by Chile’s economic growth going forward. Chilean power plants and industrial users switched from natural gas to fuel oil and diesel due to lower gas imports from Argentina. However, growth in LNG imports from the U.S. and Trinidad and Tobago, and natural gas imports from Argentina’s Vaca Muerta shale field have cut some gasoil imports since 2016.
On the fuel supply side, Chile has remained relatively flat with a minimal uptick in refinery utilization and lack of investment in new refining capacity. As a result, Chile is highly dependent on imports to meet its fuel demand and U.S. remains a dominant supplier. In 2019, U.S. accounted for ~95% of Chile’s fuel imports reaching 139,000 bpd barrels per day.
Chile has altogether three oil refineries with a combined capacity of 231,000 barrels per day and 13.6 million barrels of oil products storage capacity located in refineries, marine importing terminals, and storage and distribution facilities. State-owned Empresa Nacional del Petróleo (ENAP) owns all three oil refineries in Chile and ~75% of oil products storage capacity. Aconcagua and Biobío refineries are the larger refineries in Chile that are responsible for most of the domestic fuels production, particularly gasoline and diesel followed by Gregorio refinery which is the smallest refinery of all.
Chile’s refining capacity has remained flat over the past five years and no new refinery has been planned although there are no legal barriers to private participation in the oil and gas industry in the country. Utilization across refineries in Chile has remained fairly consistent over the past five years but lack of additional refining capacity remains the main challenge in meeting domestic fuel demand. ENAP’s refineries mainly produce gasoline followed by diesel and LPG and only meet 60% of Chile’s total fuel demand. In particular, ENAP’s refineries have been able to meet 94% of country’s gasoline demand but continue to lag in meeting more than half of diesel demand in Chile. Chile mainly imports low-sulfur diesel and LPG to bridge the supply gap from local refineries. As Chile does not have any international oil product pipelines with neighboring economies, all fuel imports are made through marine terminals along the coast. Chile’s low-sulfur fuel regulation for gasoline and diesel are stricter than those of its neighboring countries resulting in increased imports of diesel from U.S. refineries in comparison to the nearby countries.
GDP growth coupled with slow growth in domestic refinery fuel production and lack of planning for new capacity addition will continue to drive Chilean fuel imports in the near-term. ADI’s recent multi-client study addresses several strategic questions on the outlook for U.S. fuel exports to Latin America through 2030 by analyzing the region’s fuel market drivers, refining capacity, utilization outlook, and export/import infrastructure analysis. The study provides fuel-wise and country-wise deep dives for Latin America with competitive strategies for U.S. fuel exporters. Download the study prospectus to learn more.
– Swati Singh and Uday Turaga
