Rodriguez: Ministers to Sign Gas Pipeline Framework in December

The energy ministers from Argentina, Chile, Brazil, Paraguay, Peru and Uruguay will sign in December the legal framework for the Southern Cone gas pipeline project that would interconnect their countries, Chile's energy minister Jorge Rodríguez told reporters at the IBC-BNamericas Energy Integration Congress in Santiago, Chile.

The US$3bn pipeline network would transport gas from Peru's Camisea fields through northern Chile, Argentina and Uruguay until reaching Porto Alegre in Brazil.

The ministers have drawn up the document during the last four months, which is a record time for legislation of this scope, Rodríguez said, adding the framework should be ready to sign by the end of November.

A key outstanding issue is the creation of a multilateral dispute resolution mechanism so there is an amicable way to resolve disputes between countries when they arise, Rodríguez said.

In addition, there is the question of the role of Bolivia, which has participated in meetings about the project as an observer but has large quantities of gas and is considered a key gas supplier in the Southern Cone. "They have to make the decision [whether to participate], it is not up to me to tell another country what to do," Rodríguez said.

The official has said the energy ministers could sign the framework on December 8, the day before the Mercosur summit in Montevideo.

Peruvian authorities have reportedly questioned that date for the signing, but Rodríguez downplayed any disagreement. "I have expressed the hope it could take place in the presidential meeting in Montevideo, but obviously the presidents are independent and they have to make the decision they consider appropriate," Rodríguez said.

Once the energy ministers sign the framework, it will be up to the congress of each country involved to ratify it, he said.

The idea is to give legal guarantees to companies that would invest in the project to produce, transport and distribute the gas and to those firms in charge of building the pipelines from Peru to Brazil.

Rodríguez emphasized that the role of the energy ministries of the countries involved in the project is to provide clear rules to facilitate investment and it will be up to the private companies to negotiate the volumes and price of the gas, not the governments.

The Inter-American Development Bank and the World Bank have confirmed their interest in supporting and possibly financing the project, but financing is seen as being dependent on clear rules and good political will from all the parties involved. "It could fail but we have a great opportunity to advance this project which is very difficult but it could pave the way for much deeper regional economic integration in the future," Rodríguez said.


One major potential obstacle to the project is that Peru may not pass the framework legislation due to its strong historical and social animosity towards Chile, a private sector consultant, who asked not to be named, told BNamericas at the EIC.

Both Peru and Bolivia have ongoing border disputes with Chile and Chile has been accused by some politicians of selling arms to Peru's northern neighbor, Ecuador, during a conflict between the two nations in the 1990s.

Critics of the project also say Peru does not have enough gas to export to Chile as well as to meet domestic demand and export liquefied natural gas (LNG).

"Northern Chile needs that gas and if it cannot get it from Peru it will have to get it from somewhere else, but time is running out," the source said.

Chile's energy intensive mining industry in the northern desert part of the country depends heavily on power generation from natural gas, but recent gas export restrictions from Argentina have led to more use of coal-fired generation and to the government seeking alternative gas sources.

Rodríguez told reporters in May this year that Belgian energy company Traactebel was studying the feasibility of a US$400mn, 1,150km gas pipeline to bring gas from Camisea to Chile and northern Argentina. The pipeline would transport some 23 million cubic meters a day (Mm3/d) of gas from Pisco in Peru to Tocopilla in northern Chile. Of this amount, about 5Mm3/d would be consumed in Chile's northern power grid (SING) and the remaining 18Mm3/d would be re-exported to Argentina through the existing GasAtacama and NorAndino pipelines.

Tractebel owns NorAndino and northern Chilean power generators Electroandina and Edelnor. GasAtacama is owned 50:50 by local power generator Endesa (NYSE: EOC) and US-based CMS Energy (NYSE: CMS).

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