MIAMI, Jan. 23 Brazil and Venezuela have taken the first formative step toward creating a transcontinental gas pipeline, a task that some consider prohibitively expensive and overreaching.
During the Mercosur talks in Brazil, Brazilian President Luiz Inacio Lula da Silva and his Venezuelan counterpart, Hugo Chavez, signed what was termed a declaration to begin the construction of the South American pipeline in 2009 granted the feasibility study commission returns positive results. Study findings are set to be delivered to energy officials by the end of this year.
The pipeline would begin in Venezuela -- home of the world's eighth-largest gas reserves -- and traverse the length of Brazil, extend into neighboring Uruguay and stretch deep into the heart of Argentina, covering more than 6,200 miles.
The project is estimated to cost about $20 billion and would take about eight years to complete.
Just who will pay for the ambitious project remains uncertain.
Neither Lula nor Chavez has indulged skeptics with answers on the profitability of the pipeline, instead highlighting its potential to alleviate the region's energy shortage.
During the idea's introduction last year, Chavez said the pipeline would guarantee fuel for all South American countries in the 21st century and beyond.The project is also slated to include Bolivia, which boast one of the largest gas reserves in the hemisphere, though remains one of its poorest countries.
Fast-forwarding to Tuesday, Lula, whose country's economy has been particularly sluggish over the last two years, while Venezuela's has thrived, said his new economic policy would address a need to develop Brazil's energy provision problems.
The pipeline, according to plans revealed last year, would serve to bring much-needed fuel to Brazil's impoverished northeast.
Connecting the continent via energy channels plays directly into Chavez's call for greater South American integration, particularly among Mercosur nations Argentina, Brazil, Paraguay, Uruguay and Venezuela.
Venezuela stands to make billions on the project it will likely have to mostly finance from its state coffers awash in petroleum profits. It is likely to allow Caracas to pull further ahead of Bolivia in the race to dominate the gas sector in Latin America.
What Chavez hasn't mentioned is the daunting construction effort to span mountains and dense Amazon forests, which some critics contend could increase the price tag on the project by another $5 billion or more.
Frank Verrastro, director and senior fellow for the Center for Strategic and International studies Energy Program, speculates that the ambitions of the leaders might outweigh the abilities of contractors charged with constructing the pipeline. Verrastro surmised that the ambitions espoused by Chavez, Lula and Argentine President Nestor Kirchner might be more political posturing rather than effort to fulfill South America's energy needs.
Sometimes a political maneuver can overcome common sense, said Verrastro, commenting on the pipeline, adding that it would likely make more economic sense to transport Venezuelan gas in liquefied form via trucks than spend billions of dollars building a pipeline. Verrastro also noted the potential political uncertainties associated with Chavez. The populist leader has recently clamped down on foreign oil companies -- calling for the nationalization of its most lucrative oil field -- and increased tariffs paid to the Venezuelan state. Chavez's effort to extract more revenue from big oil seems, however, to bode well for the pipeline project, as Venezuela is awash with oil revenue due to the additional oil taxes and skyrocketing prices at the pumps.
South America's only member of the Organization of Petroleum Exporting Countries, Venezuela has benefited from inflated oil prices and used soaring global energy demand to its advantage. Venezuela exports an estimated 3.3 million barrels of oil per day.
(Comments to energy@upi.com)
Copyright 2007 by UPI
