Latin American Gas Pipeline Project May Only Be a Dream

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Industrial Info Resources (Sugar Land, Texas). The Gas pipeline project launched in December 2005 by Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez was proposed in order to build a $4 billion gas pipeline spanning more than 12,000 kilometers between their respective countries. This project has caused some analysts to wonder whether the public pledges of unity amongst these two powerful South American countries can withstand such a test. There are three main concerns: the project’s estimated cost of nearly $20 billion, the environmental concerns of burrowing through the Amazon rainforest, and also dealing with competing interests of each individual nation.

This project will start in Puerta Ordaz of Venezuela and run to Rio de la Plata (Argentina) via Brazil, Paraguay, and Uruguay. Moreover, Argentina, Brazil, and Venezuela are planning to include Bolivia due to the fact that it single-handedly accounts for 40 billion cubic feet of gas reserves. The cost of this pipeline project has been estimated at nearly $20 billion and with construction taking approximately five to seven years. This project’s overall effect is to distribute nearly 150 million cubic meters of gas per day to seven South American countries. For more details view related January 30, 2006, news article - Venezuela, Brazil and Argentina Agree to Begin New Gas Pipeline Project.

This gas pipeline project will be operated by a company run jointly by Venezuela, Brazil, and Argentina. This has been described as the first true joint venture of a political coalition determined to forge a new South American identity. This also supports the initial agreement that no private company would operate the pipeline single-handedly; however, some experts suggested that private financing would help insulate the long-term project from political and financial turmoil in a region that is historically known for its instability.

Overall, Venezuela has the largest Latin American natural gas reserves (150 trillion cubic feet) while Bolivia comes in second calculated at over a trillion cubic meters. Brazil buys half of its natural gas from Bolivia, and Brazilian demand is expanding rapidly as the demand for natural gas for power generation, cooking, and fuel for automobiles continues to rise.

Oil experts say the pipeline project would be a huge technical challenge, while environmentalists at the same time say it could prompt massive deforestation in Brazil’s Amazon region. As the pipeline will have to transverse this vast river system and forest home to 25 percent of the world’s plant species and numerous indigenous communities, the environmental group known as Greenpeace and Alerta Petrolera Orinoco Oilwatch are worried about the environmental impact and enormous consequences that this pipeline project may have.

In the past four years, Argentina, Brazil, Bolivia, Uruguay, and Paraguay have elected presidents who seek to promote more regional teamwork and less dependence on international financial markets. Energy-related issues have been instrumental in determining the outcomes of several of those elections serving as a lightning rod for public discontent. Energy has become increasingly seen as a tool to achieve greater economic independence in the region. However, analysts have said that the construction of the pipeline could set Bolivia and Venezuela on a collision course as competitors for clients in South America’s natural gas market. According to Juan Ramon Quintana, minister for the Bolivian Government, “There are remote possibilities to carry out this pharaonic pipeline project; we are not giving much credit to its construction.” Without Bolivia’s gas resources, the integration of South America’s gas networks is unlikely to become a reality.

The three principal authors of this pipeline project have good reasons for wanting the project to progress quickly. Argentina, the long time natural gas producer, needs to reduce exports to rapidly meet increasing domestic demand. Meanwhile, Venezuela would benefit greatly from expanded markets for its natural gas and Brazil already highly depends on its gas imports and is planning to triple its consumption by the end of the decade.

Most of the project’s critiques are closely related to the high cost of the project. According to Karen A. Harbert, Assistant Energy Secretary, “The pipeline would take years to complete, if it is ever achieved, there are tremendous technical and environmental challenges. But most importantly, such a financial support system for this type of a project is simply unfeasible.”

The main question among specialists is if it is worth constructing the pipeline considering that there are other less expensive options for the transmission of the natural gas. According to Federico Mezzardi, an Argentine energy specialist, several research results show that sea transport is the most convenient way for long distance natural gas transport mainly because gas buyers will not depend on one unique supplier, rather competition among the market will result in lower prices.

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