Sat, Jan 21, 2006 page7

• South American pipe dreams may become a reality

  • AP
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  Aiming to leverage their huge natural gas reserves, left-leaning leaders across South America are in serious talks to build a network of pipelines stretching thousands of kilometers to feed growing demand and wean themselves from US economic influence.

  But oil industry experts say their show of brotherhood may backfire if this expensive pipe dream becomes reality, since the network could turn the continent's neighbors against each other as they compete for clients.

  In Brasilia on Thursday, the presidents of Brazil, Argentina and Venezuela discussed plans for an 8,000km pipeline from Caracas to Buenos Aires through Brazil's Amazon rain forest, complete with links to Bolivia, Paraguay and Uruguay.

  "This pipeline is vital for us," Venezuelan President Hugo Chavez said, stressing it would distance the region from the US-backed free market policies known as the Washington Consensus.

  The pipeline, which would cost US$20 billion and could be built within five to seven years, "is the beginning of the South American consensus," Chavez said.

  Silva and Kirchner did not speak to reporters after the leaders' five-hour meeting, but instructed their energy ministers to give priority to the project.

  The leaders also agreed to meet in Argentina in March to review technical plans being prepared by the three nations' state-owned oil companies.

  Venezuela and Bolivia have the first and second largest natural gas reserves in South America, an amount that Chavez said will last two centuries even with increased production in Brazil and Argentina, where demand is increasing for the fuel for power generation, cooking gas and cars.

  But the pipeline could put Bolivia and Venezuela on an economic collision course, because Bolivia is already the biggest exporter of gas to Brazil and wants to increase exports to Argentina through another, much shorter, proposed pipeline.

  By joining the much larger pipeline, Bolivia "would be tying their production prospects to whatever Chavez wants to dictate," said Andres Stepkowski, a Bolivia-based oil industry consultant.

  Chavez said the nations don't want to compete, adding he believes there isn't "any fear in Bolivia, rather there's joy that this project is going to integrate us all, you wait and see."

  In keeping with Chavez' socialist vision of reducing the US' "imperialist" political and economic influence, the larger pipeline would be built and operated jointly by Venezuela's state company, Petroleos de Venezuela SA and Brazil's state-owned petrol company, Petroleo Brasileiro SA.

  Chavez said each country would pay a share of the construction cost though the exact amount will not be determined until the March summit in Argentina. However, he suggested that the nations would not pay the full bill and that outside investment would be needed.

  Some Chinese companies have already expressed interest, Chavez said, and he predicted additional investment won't be hard to find. The project could pay for itself five to eight years after being completed, he said.
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