(Adds industry comments, detail, context)
By Alexandra Ulmer
SANTIAGO, May 15 (Reuters) - President Michelle Bachelet said on Thursday that Chile would build a new liquefied natural gas (LNG) terminal and strengthen the state-run oil company as she set out her $650 million energy policy that seeks to deal with a mounting power crunch.
An LNG terminal would be built in the central-south region of the mining powerhouse, she announced. It would be Chile's third, alongside the already running Mejillones in the mineral-rich north and centrally-located Quintero, which is set to also be expanded.
"We want more LNG in electricity generation, with greater availability of regasification terminals," Bachelet said.
Power projects in Chile have increasingly faced strong public opposition on health and environmental grounds, often winding up entangled in regulatory limbo.
Center-left Bachelet, who took power in March, has spoken in favor of gas as part of a quick, substantial and environmentally acceptable solution to the stalemate. She is also keen to expand the use of renewable energy.
The push towards LNG has been further bolstered by a surge in shale gas production in the United States that is transforming the global energy market.
State oil company Empresa Nacional del Petroleo (ENAP) would participate in the construction of the new LNG terminal, and the energy plan included an extra $400 million to bolster the debt-plagued firm.
But experts warn that LNG is no silver bullet, and much depends on whether its price falls well below that of coal.
The government estimates that its energy drive will help add a little over 6,000 megawatts to Chile's current matrix of roughly 18,000 megawatts by 2025.
Like many of its emerging market peers, Chile is struggling to strike a balance between its power-hungry mining industry and the environment.
Illustrating the social challenge, a small group of protesters demonstrated in front of the La Moneda palace on Thursday to protest the Alto Maipo hydropower project, which they say could harm Santiago's water supply and ecosystem.
While industry players were largely positive about the focus on LNG and the stronger state role, they cautioned much depends on implementation.
"It's challenging; it's ambitious," said Joaquin Villarino, the head of mining lobby Consejo Minero, which groups together world No.1 copper producer Chile's biggest private miners.
He said he deemed the plans "neutral" for miners for the time being, and stressed he was awaiting the fine print.
The new chairman of state copper producer Codelco Oscar Landerretche, an economist close to Bachelet, told Reuters the program was "important for the mining industry."
He declined to comment on its specific effects on Codelco.
Industry players concurred the government appeared keen to take action.
"I think it's very important that they're making energy issues this relevant," said Bernardo Larrain Matte, the chairman of Chilean energy group Colbun. (Reporting by Alexandra Ulmer, Writing by Alexandra Ulmer and Rosalba O'Brien; Editing by Cynthia Osterman)