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Moving Towards South American and Caribbean Energy Integration
By Odeen Ishmael
Guyana Journal
March 2006


In the past month three important decisions have raised hopes for progress towards the much touted process of energy integration in South America and the Caribbean.

The first was made at a meeting in Brasilia on January 19 when the Presidents of Venezuela, Brazil and Argentina agreed to construct a 10,000-kilometer gas pipeline from Puerto Ordaz in eastern Venezuela to Buenos Aires. To be jointly built by Venezuela and Brazil, it will follow a route to the south-east just below the border lines of Guyana, Suriname and French Guiana, and then south through the Amazon rain forest of Brazil, across Uruguay and terminating in the Argentine capital. A link-up will also be made to Bolivia, but the entire system will not be ready for at least a decade.

The three Presidents will meet on March 10 2006 in Buenos Aires to concretize the plans for this mammoth enterprise, estimated to cost US$20 billion.

Obviously, this ambitious project will present a serious technological challenge by its very magnitude. Further, it is bound to raise environmental concerns since the pipeline will run through the Amazon rain forests. The technological and environmental hurdles, undoubtedly, will further raise the projected cost.

Nevertheless, Venezuelan President Hugo Chavez, the chief proponent of the South American energy integration project, is very optimistic about it. At the Brasilia meeting he stated that both Venezuela and Bolivia have enough gas resources to quite easily supply the growing domestic and industrial demands of Brazil and Argentina. Some analysts say Brazil, currently developing its own gas and petroleum potential, will save US$11 billion annually in gas costs alone when the pipeline finally becomes operational.

But critics of the proposed project feel that Bolivia would be at a disadvantage because its production capabilities will be dictated by Venezuela. However, Chavez dismissed this fear saying that Venezuela would not compete with Bolivia which, he said, would be a big beneficiary in this integration scheme.

At present, Bolivia is Brazil’s largest gas supplier and, in eying the Argentine market, it already has a separate proposal for a shorter, but costly, gas pipeline to its southern neighbor.

Gas has caused much political convulsions in Bolivia in recent times. In October 2003, a national uprising forced out a president who had a multibillion dollar plan to construct a pipeline to a Chilean port, from where liquefied gas would have been exported to Mexico and the United States. The national rejection of this plan was no doubt due to the distrust of Chile with whom Bolivia has a long-standing border dispute.

With the abortion of this lucrative proposal – opposed vehemently by the current Bolivian President Evo Morales when he was an opposition trade union leader – Bolivia now wants to build a pipeline through Peru to the Pacific coast to export gas to Mexico and the US. However, this proposal faces problems since Peru is expanding its own gas production and plans to export liquefied gas from next year to the same markets Bolivia wants to access.

While the proposed Venezuela-Brazil-Argentina gas pipeline is attracting attention, the second decision taken recently relates to current Venezuela-Caricom petroleum relations. So far, the Venezuela-Caricom energy link remains the more successful part of the overall integration network. One drawback in this arrangement though is that Caricom’s big gas and petroleum producer, Trinidad and Tobago, is not a part of PetroCaribe and had expressed disappointment that its other Caricom partners, except Barbados, signed on to the agreement.

But after a two-day mid-term summit in Port of Spain on February 9-10, Trinidad and Tobago’s Prime Minister Patrick Manning said the leaders patched up their differences over PetroCaribe. He gave no details on what agreement was reached, but the official Caricom communiqué announced Trinidad and Tobago's "willingness to facilitate" a suspension of Caricom's Common External Tariff to allow PetroCaribe members to purchase Venezuelan oil.

This may be regarded as good news for all the PetroCaribe countries which will soon include Haiti. Some of them are still working on their bilateral purchasing agreements with Venezuela, and Trinidad and Tobago’s support may help to hasten the process.

The third related decision was made on February 14 when Trinidad and Tobago and Venezuela announced that they would soon resume talks – suspended when PetroCaribe was established in June 2005 – on sharing oil and gas resources of two fields straddling the two countries’ maritime border.

It is possible that during these discussions, Trinidad and Tobago will pursue an initiative for a bilateral agreement consistent with overall plans to strengthen its position as Caricom's sole oil and gas exporter. If this finds agreement, Trinidad and Tobago may eventually be able to process any Venezuelan crude oil, purchased under PetroCaribe, by Caricom countries that have no refineries.

With these three significant decisions, the possibility clearly exists for South America and the Caribbean to move towards effective energy integration.

(Caracas, 23 February 2006)
Odeen Ishmael PhD is Guyana’s Ambassador in Caracas, Venezuela.
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