Argentina & Bolivia Agree on US $2 Billion Pipeline

Argentine and Bolivian government officials agreed Tuesday to go ahead with the US$2bn Argentine Gasoducto del Noreste Argentino (GNA) project to transport gas from Bolivia to northeastern Argentina, Bolivia's government news agency ABI reported.

The project is designed to help meet rising gas demand in Argentina with reserves in Bolivia's Tarija department.

Argentina's planning minister Julio De Vido and energy secretary Daniel Cameron met with Bolivia's hydrocarbons minister Alvaro Rios and President Carlos Mesa in Bolivian capital La Paz to discuss the project, as well as other aspects of energy integration between the two countries. The meeting laid the groundwork for Mesa and his Argentine counterpart Nestor Kirchner to sign a final gas sales agreement on April 13.

The GNA project would use part of an existing pipeline between the two countries that was used to export gas from Bolivia to Argentina until the 1980s. Bolivia stands to earn some US$500mn a year by exporting gas to Argentina and US$100mn in royalties for the government, ABI reported.

The project consists of a US$1bn, 1,500km pipeline, which will initially transport 10 million cubic meters a day (mcm/d), and could be enlarged to 30mcm/d, De Vido said. Construction should start by July at the latest and wrap up in 2006.

Argentina's government has hired local construction firm Techint to build the pipeline and Techint will invest US$750mn, or 75%, of the capital, while the government will put up the rest. The pipeline will connect to Argentina's existing Loma la Lata pipeline operated by local gas transporters TGN and TGS, and could be extended to Paraguay and Brazil in the future.

Meanwhile, Techint is looking to partner with one or more gas producers in Tarija department to supply gas to the pipeline. Investment in the upstream part of the project will be about US$700mn, De Vido said. Techint could partner with Brazil's Petrobras and/or Spain's Repsol YPF, and Russian companies are also interested in investing in the project, Infobae quoted Techint's director Sergio Einaudi as saying.

Argentina's gas demand is rising but domestic reserves are declining with lack of investment in gas exploration due to low tariffs, which have been frozen since the devaluation of the peso in early 2002. Bolivia, on the other hand, has some 55 trillion cubic feet of gas reserves, which it eventually aims to export to the lucrative North American market, but local opposition to the project means the government is looking for gas markets closer to home.

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