A decision by Chilean authorities to approve a big hydroelectric pro­ject to dam two Patagonian rivers, flood valleys and give a vital boost to the country’s energy capacity has inflamed tensions in an energy-importing country struggling to find new fuel sources to power its development.

Monday’s decision, in the southern town of Coyhaique, boosted shares in Endesa and Colbun, which own the HidroAysén project, but also sparked violent protests there and in the capital, Santiago. Mounted police, tear gas and water cannon were deployed to break up protests and more than 100 people were detained.

“Whether we like the project or not, the country’s environmental institutions have done their job,” Omar Muñoz, mayor of Coyhaique, told the Financial Times. His car was stoned after he left the meeting that gave the green light to a project protesters fear will cause irreparable damage to the scenery and ecosystems in the glacier-carved wilderness of Chile’s far south.

The project is expected to cost a total of $7bn between the construction of five hydroelectric plants and a transmission line. It will add 2,750MW to the country’s main SIC electricity grid, an increase in capacity of 35 per cent.

But it would mean building five power stations on the Baker and Pascua rivers, flooding nearly 6,000 hectares (14,800 acres) of land as well as the construction of a 1,900km (1,180 mile) transmission line. Approval for that is expected to be sought later this year. The project would not be fully operational for more than a decade.

Daniela Castro of Conservación Patagonica, an environmental group opposed to the project, said the scheme risked ruining the landscape, decimating the population of South Andean deer, spoiling fly fishing and endangering native fish stocks.

“I don’t know if we can stop this but we can definitely be a headache for the government,” she said.

Mr Muñoz said, however, that the company could now begin seeking permits to build infrastructure.

“The project will generate an environmental impact but there is compensation and we have to transform this into an opportunity for the Aysén region,” he said. “We can negotiate benefits.” He said the region had some of the country’s highest utilities rates and needed investment in education, health and other services.

Chile is rich in copper but has scant hydrocarbon resources. It used to rely on Argentina for gas supplies, but suffered serious shortages when its neighbour began slashing gas exports to supply its booming domestic demand.

In the end, Argentine gas exports dried up a few years ago and Chile built two liquefied natural gas plants, but that has proved costly.

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