TRANSGAS GROUP STILL PLANS TO BUILD PIPELINE TO CHILE

TRANSGAS GROUP STILL PLANS TO BUILD PIPELINE TO CHILE

An Anglo-American consortium, which appeared to have lost to a Canadian- Chilean group in a battle to build a natural-gas pipeline from Argentina, is to go ahead with its own project further south, a Tenneco executive said.

The Transgas group, which is led by a Tenneco Inc. unit and British Gas, will start building the pipeline next April with the project coming into operation in late 1997, Ewell Muse, president of Tenneco Gas Latin America, said last week."We are very confident our project will go ahead," Mr. Muse told reporters. "Our prices are at least 5 percent cheaper than our competitor, and in some regions more."

Transgas seemed to have lost out last month when two key Chilean electricity generators opted for supply contracts with the rival GasAndes group, led by Canada's Nova Corp. International and Chilean utility Chilgener.

Transgas anticipates signing deals with at least three power projects, including two U.S. power generators who are planning to build electricity plants in Chile, said Mr. Muse.

He said the power plants would take up around 40 percent of the capacity of the pipeline, with most of the rest being taken up by industrial users.

The group expects to sign the contracts this week and to receive a government concession to transport gas by the end of October, said Mr. Muse.

For Tenneco, whose major profit center is pipelines, expanding to fuel Latin America's booming economies is important as the U.S. market is maturing, said Mr. Muse.

"The return on this project is adequate, not outstanding, but it is within Tenneco's minimum," he said.

The Transgas project will involve an investment of $854 million. Of that, $670 million will be for the pipeline, with the balance for the distribution, Mr. Muse said.

Transgas will build a 500-mile pipeline from the gas fields of Neuquen in central Argentina, across the southern Andes and then up Chile's central valley to Santiago.

GasAndes plans a much shorter route from Mendoza in northern Argentina to Santiago and will use an existing pipeline to transport gas from Neuquen to Mendoza.

Energy analysts have said the Chilean market is only large enough for a single pipeline, but both groups are adamant that they will go ahead with their projects.