Energy independence is South America’s pipe dream | VailDaily.com
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Energy independence is South America’s pipe dream

LA PAZ, Bolivia – 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 (miles) to feed growing demand and wean themselves from American 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 a 5,000-mile 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 Thursday in Brasilia. He said that Venezuela and Bolivia “have gas for 200 years” and can supply fuel to Brazil and Argentina, where demand is increasing for power generation, cooking gas and cars. It also would distance the region from the U.S.-backed free market policies known as the Washington Consensus.The pipeline, which would cost $20 billion and could be built within five to seven years, “is the beginning of the South American consensus,” Chavez said. The leaders also agreed to meet in Argentina in March to review plans being prepared by their respective state-owned oil companies.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.”Bolivia already lost a big export opportunity with the failure of a multibillion dollar plan to build a pipeline over the Andes to a Pacific Ocean port in Chile, where the gas would be liquefied for shipment to Mexico and Southern California.Bolivian president-elect Evo Morales, who will be inaugurated Sunday, helped lead a rebellion against that plan in an uprising that ousted Bolivian President Gonzalo Sanchez de Lozada and killed 60 people.The chief complaint was a long-standing cross-border conflict: many Bolivians still seethe over the 19th century war with Chile that left them landlocked. San Diego-based Sempra Energy then turned to Indonesia as its supplier.But Bolivia’s vice president-elect, Alvaro Garcia Linera, said the new Bolivian administration wants to negotiate for a pipeline to reach Pacific Rim clients through Peru. That route would be politically palatable because of good relations between Bolivia and Peru, and the pipeline could also supply destitute Indian communities in Bolivia’s highlands where gas is scarce.But Bolivia may be too late – Peru is already tapping its own gas fields in the Andes, and hopes to start shipments from a gas liquification plant in 2009.If a Bolivia-Peru pipeline is ever built, the two nations “would be fighting for the same markets, Mexico and the United States,” said Pietro Pitts, editor-in-chief for the Venezuela-based LatinPetroleum.com.In keeping with Chavez’s socialist vision of reducing America’s “imperialist” political and economic influence, the larger pipeline would be built and operated by Venezuela’s state company, Petroleos de Venezuela SA, and Brazil’s state-owned petroleum company, Petroleo Brasileiro SA.Chavez said each country would pay a share of the construction cost, with Venezuela’s amount reaching “several billions of dollars,” 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 he did not name 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.But the technological challenges of building a pipeline through the Amazon – not to mention environmental concerns – could push the cost to as much as $40 billion, according to industry experts.”You try building a pipeline through that mud – it can be done, but the price would be so outrageous no project can live with it,” Stepkowski said.Chavez dismissed that notion, saying Russia managed to build a pipeline stretching thousands of miles to Europe.But Brazil may be reluctant to invest heavily, having just committed this month to spend $18 billion to reduce its own dependence on imported gas by developing vast fields off its southeastern coast.Cost also would inhibit a Bolivia-Peru pipeline. Bolivia’s state-owned oil company has been cash-strapped since its industry was privatized in the 1990s, and the foreign companies that took over have mostly frozen their investments due to political uncertainty.Morales claimed during his campaign that Bolivia’s gas wealth had been looted by privatization, and vowed to nationalize the industry. He’s softened his tone since his landslide election, but experts say it may take six months before the investment climate becomes clearer.Companies who were behind the plan to ship Bolivian gas to Chile – Britain’s BG Group PLC; Britain’s BP PLC through its 60 percent ownership Pan American Energy; and the Spanish-Argentine Repsol YPF SA – declined comment on whether they would be interested in financing a Bolivia-Peru pipeline.If anything, it will probably take years of planning to determine whether the pipelines are ever built, said Larry Chorn, a petroleum engineering professor at the Colorado School of Mines.”Getting the contract, financing and construction aligned is not a trivial effort,” he said. “The entire sequence often requires four to six years before ground breaking.”—-Associated Press writer Harold Olmos contributed to this story from Brasilia, Brazil.Vail, Colorado


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