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Plans Under Way for South American Natural Gas Pipeline

Proposed pipeline could link Peru, Chile, Argentina, Uruguay, Brazil, Bolivia and Paraguay

Posted: June 24, 2005

Washington -- The Inter-American Development Bank (IDB) is supporting plans for a South American natural gas pipeline, a project the IDB says is vitally important to the region's energy integration and competitiveness.

In a June 22 statement, the IDB said the proposed pipeline could link Peru, Chile, Argentina, Uruguay, Brazil, Bolivia and Paraguay.

"This is a great opportunity. We will give it our full support," IDB President Enrique Iglesias said after holding a meeting with government ministers from countries promoting the pipeline. "This project will be a milestone in the history of South America's integration."

The pipeline would connect Peru to the existing pipeline network between northern Chile and Argentina, from where natural gas could eventually reach the city of Porto Alegre in southern Brazil. The project would include the construction or expansion of pipelines in Argentina as well as new infrastructure in Peru and Brazil.

Iglesias said the IDB has a wide range of technical-cooperation tools available for environmental impact studies. Additionally, the IDB has financial mechanisms to support the pipeline and has experience in backing energy projects with private-sector sponsors, he said.

A working group established by the countries involved in the proposed project would call on specialists from the IDB and other multilateral agencies for support in drawing up a framework for the project, and these specialists would discuss possible ways for its eventual financing. The group also expects to meet with private-sector companies to inform them about the project and gauge their interest in participating.

The IDB said that to keep Latin America and the Caribbean competitive in an increasingly global economy, "greater investment is needed in the region's infrastructure, particularly in such critical areas as energy, transportation, and water and sanitation."

A 2004 study about the feasibility of a natural gas pipeline in South America says that natural gas is rapidly gaining in "geopolitical importance." Natural gas, said the study, is the "fuel of choice" for consumers seeking its "relatively low environmental impact, especially for electric power generation."

The study, prepared by Stanford University in California and Rice University in Texas, said discussions of trade in natural gas in South America began as early as the 1950s. But it was not until 1972 that the first international gas pipelines in the region, linking Bolivia and Argentina, were built. The study, called Natural Gas Pipelines in the Southern Cone, is available on Stanford University’s Web site.

President Bush's National Energy Policy Development Group has said that Latin America and the Caribbean are growing as major consumers of oil and natural gas. The energy development group issued a report in 2001, saying that "unprecedented development" of Latin America's vast natural gas reserves -- 222.7 trillion cubic feet, as of January 2000 -- increases regional "self-reliance," promotes economic integration, aids the environment and stems the growth in oil demand.

For additional information see a chapter from the report summarizing the group's recommendations on national energy security and international relationships.

Eric Green
Washington File Staff Writer

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