UPDATE 1-Chile says Argentine gas cuts not hurting yet

(Adds details, quotes, possible alternative supplies)

By Gabriela Donoso

SANTIAGO, Chile, March 26 (Reuters) - Argentina''s restriction on exports of surplus natural gas will not immediately affect supplies to Chile, which depends on its neighbor for more than 90 percent of its natural gas needs, but could in the future, a government official said on Friday.

Some 35 percent of Chile''s electricity comes from natural-gas burning plants, and Chilean power companies'' shares dropped on the stock exchange on Friday after Argentina announced some restrictions on exports.

Among the falling power issues that dragged down Chile''s stock market were giant energy company Endesa , its parent Enersis , generator Colbun , Compania General de Electricidad and Edelnor .

"If we could be affected, we will coordinate (with Argentina) so that the impact will be as little as possible," Luis Sanchez, executive secretary of the government''s National Energy Commission, told reporters at a press conference.

Sanchez said Chile was working to guarantee respect for supply contracts. But he said "we cannot rule out contingencies" given that the extent of Argentina''s supply problems are not completely clear.

Argentina''s planning ministry said on Thursday evening it would divert surplus exports to the local market to guarantee supply for local demand as the country battles an energy shortfall due to dry weather hitting hydroelectric plants and higher demand because the economy is expanding rapidly.

Argentine Interior Minister Anibal Fernandez said on Friday morning that the announced cuts did not affect any current exports since there are no surpluses at this time.

He said contracts are being respected now, but he warned that deeper cuts could come.

"If there is a lack for homes, for businesses, for cars, trucks and transportation, for contracts signed with industry that cannot be interrupted, or if there is not enough gas to generate electricity, the state can cut exports under current contracts," Fernandez said.

Chile''s Sanchez and Economy Minister Jorge Rodriguez traveled to Buenos Aires on Friday for supply talks.

CHILE SEES DIESEL ALTERNATIVE, NOT BOLIVIA

Chile''s most likely alternative if gas supplies are cut from Argentina is to fuel generators with diesel, Chile''s Rodriguez said.

Chile has very little petroleum production, but it was not immediately clear if it would have to increase imports to meet the potential demand for diesel.

Chile''s only gas pipeline is with Argentina. There is no gas supply line from neighbor Bolivia, a big natural gas producer, because of historic frictions between the two countries.

Bolivia is analyzing a petition from Argentina to double, starting in May, gas purchases from Bolivia, which are currently 4 million cubic meters a day.

But Bolivia''s main political parties and biggest labor federation rejected the plan saying they feared the gas would benefit Chile.

"Not one molecule of gas exported to Argentina will go to Chile," vowed Bolivia''s Economic Development Minister Xavier Nogales.

Uruguayan President Jorge Batlle said better energy integration between Mercosur countries Argentina, Brazil, Paraguay and Uruguay and its associate members Bolivia and Chile could have averted the crisis.

Argentine power generators have cut sales of electricity to Uruguay, forcing that country to negotiate alternative supplies with Brazil and fired up two of its own thermoelectric plants to maintain electricity supplies.

(Additional reporting by Lucas Bergman in Buenos Aires, Conrado Hornos in Montevideo and Rene Villegas in La Paz) ((Reporting by Gabriela Donoso; editing by Christian Wiessner; Reuters Messaging: gabriela.donoso.reuters.com@reuters.net; +56 2 370 4250; e-mail: santiago.newsroom@reuters.com))