Chile faces an energy crisis that threatens copper mining - its economic mainstay - as hydroelectric dams gasp over the worst drought in 100 years and natural gas supplies are cut off in the mineral-rich north.

Drought conditions in central Chile brought on by La Niña - a cooling of the eastern equatorial waters of the Pacific - mean that hydroelectric reservoirs are at dangerously low levels, forcing the Government to declare contingency measures, such as energy conservation in public buildings.

“We assume that the energy situation will be difficult. It is possible that we will have to implement rationing. We want it to rain and for La Niña to pass to El Niño,” President Bachelet said, referring to the wet weather that characterises El Niño years.

Energy analysts say that the central region faces uncertain energy supplies until 2010, when new generation capacity comes on stream.

“The energy situation is very fragile and rationing depends on rainfall in the central region,” Francisco Aguirre, of Electroconsultores, a consultancy in Santiago, said. “If this year is as dry as 2007 was, without doubt there will be rationing.”

Timing is also against Chile, with reservoir levels about 40 per cent lower than they were a year ago and cloudless skies promising little rainfall. April will herald winter, which is likely to stretch the power grid to its limits.

Rationing could be a prescription for millions of dollars of lost production for some of the world's largest copper producers that are active in the region, including the London-listed Antofagasta, which reports results this week, the state copper company Codelco and Anglo American Chile.

Mark Turner, of Hallgarten, a New York-based research company, said that 68,000 tonnes of production could be lost over the next quarter because “any brownout/blackout situation directly affects production. Companies are riding their luck somewhat in the next three months.”

That is bad news for consumers of copper worldwide, who use the metal for wiring, plumbing and architecture, among other applications. Chile accounts for one third of world copper production, about 5.5 million tonnes a year.

Reduced production would provoke a sharp increase in the price of the metal. Analysts for Copper Studies Group, of Santiago, predict that it could rise to $5 a pound, well above present levels of $4 a pound.

“We're seeing some buying [of the metal] because of concerns over power shortages in countries like Chile and its impact on future expansions,” a New York-based commodities trader said.

Chilean miners usually are loath to acknowledge that a power shortage could hamper production. However, Marcelo Awad, the chief executive of Antofagasta, said recently: “I would not be surprised if there are production problems during the next 18 months due to a lack of energy.”

Miners in northern Chile, where massive copper mines dot the Atacama Desert, also face the prospect of rationing after neighbouring Argentina cut off natural gas supplies, forcing them to use costlier, dirtier fuels, such as diesel.

To make matters worse, GasAtacama, a leading power supplier in the region, is on the verge of bankruptcy and its collapse could mean periodic power outages.

Chilean miners put together a temporary rescue package for GasAtacama and are trying to negotiate a long-term solution, but they are reluctant to give it an outright bailout. Antofagasta has offered cash to support the utility, but wants stock or creditor status in return.

The Government has declined to inject funds into GasAtacama. However, Marcelo Tokman, the Energy Minister, drafted a special law to keep it generating in the event of its bankruptcy.

Sector specialists believe that there would be periodic power outages and rationing if the utility did go bankrupt.

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