AN OVERVIEW OF THE SOUTHERN CONE NATURAL GAS BUSINESS: AN ARGUMENT FOR REGIONAL INTEGRATION

• Jurisdiction: United States

Mining And Oil & Gas Development In Latin America
(2001)
CHAPTER 19A
AN OVERVIEW OF THE SOUTHERN CONE NATURAL GAS BUSINESS: AN ARGUMENT FOR REGIONAL INTEGRATION
Adrian F. Pérès, Senior Vice President
Pan American Energy LLC
Buenos Aires, Argentina

[Page 19A-1]

I. Some Regional Indicators

As defined in this work, the Southern Cone includes the countries of Argentina, Bolivia, Brazil, Chile and Uruguay. If the Southern Cone were a country, its economy over the last five years would have ranged between the 6th and 8th largest in the world with an annual GDP of about US$1 trillion, and a population approaching 230 million people.¹ In terms of its absolute size, the region's economy is larger than that of Canada and approaching that of the United Kingdom. However, on a per capita basis, the GDP of the conglomeration of these developing economies is 29% of that of Canada and of the United Kingdom. In terms of energy consumption, the Southern Cone's lower per capita use of energy is even more pronounced at 0.93 MMtoe/year, only 11% and 23% of these two developed economies, respectively. Notwithstanding the scale of the regional economy and the population comparable to developed countries, Southern Cone nations in comparison consume a mere fraction of energy. When taken in conjunction, these characteristics suggest the significant growth potential of energy consumption in the region, even beyond per capita GDP, as economic activity and energy consumption feed off one another, requiring increased levels of energy supply to either be developed indigenously to the region or from foreign suppliers.

Following the lead of Argentina, natural gas is expected to play an increasing important role in the overall energy matrix of the region. However, the full potential of natural gas and the benefits which it may bring economically and environmentally will only be realized in the event that a truly regionally integrated gas and energy transport system is implemented in which the exportation and importation of energy supplies can occur freely.

[Page 19A-2]

II. Natural Gas and Energy Demand in the Southern Cone

When analyzing the natural gas and energy markets in the Southern Cone, a distinction must be made between energy exporting countries (Argentina and Bolivia) and energy importing countries (Chile, Uruguay and Brazil). Non self-sufficient energy producing countries in the region depend primarily on oil, wood and hydro as fuel for power generation. In the case of Brazil, a country heavily dependent on hydroelectric power, only 2% of the nation's primary energy supply comes from natural gas, however, the Brazilian government is targeting to increase this to 12%, by 2010. Similarly, Chile currently relies on natural gas for only 16% of its energy matrix, the remainder being supplied by other fossil fuels and hydroelectric power.² Uruguay, has relied on oil, and hydro to meet its energy needs and is only now initiating the introduction of natural gas into its economy via the Paysandu and Cruz del Sur gas pipelines. In comparison, Bolivia and Argentina, both with abundant supplies of natural gas obtain 30% and 52% of their primary energy supplies from this environmentally preferable alternative.

The differences in the energy matrix profiles of the two largest economies in the region is best illustrated in the graph below:

Graph

Omitted From Electronic Version

However, Brazil's relatively high dependence on hydropower and low dependence on gas is a situation that will change considerably in the coming years as growth in gas consumption follows a ten-year trend of a 3%-5% annual...