Ramirez: No Subsidies for NatGas Exports, Price Could Be US$5/MBTU

Venezuela will not subsidize natural gas to be exported to Argentina and Brazil through a proposed 10,000km pipeline linking the three countries, Venezuela's energy and oil minister and state oil firm PDVSA president Rafael Ramirez said in a PDVSA press release.

The country is considering charging a price of around US$5 per million British Thermal Units (MBTU), which is much higher than the local gas price for industrial clients.

"Venezuela has not at any moment suggested a gas subsidy in the studies being put forward for the construction of the Gran Gasoducto del Sur," as the pipeline is known, Ramirez said.

"The technical team is currently discussing the different price formulas that include exploration costs, production, transport and distribution, whose initial estimates place a floor for marginal cost in the long term of at least US$5 per MBTU," he said.

The price floor is based on long-term marginal production costs, while the ceiling is set by the value of the fuels to be substituted with natural gas in the export markets, he added.

The price of gas in South America will depend on regional markets rather than global markets such as the US where the gas price has varied between US$15 and US$7 per MBTU in the last year, Ramirez said, however, cautioning that the price of gas in South America will rise above current values.

Bolivia reportedly sells natural gas to Brazil at a price of US$3.30/MBTU, and is negotiating to increase the price of gas exports to Argentina, which are lower at about US$2.50/MBTU.

Clients such as thermal electricity generators and petrochemical companies pay about US$0.02/MBTU for gas in Venezuela, according to figures from Enagas, the natural gas industry regulator. The price was recently lowered for the domestic market, since the government is trying to promote the use of natural gas locally.

Ramirez will meet in Caracas on March 2 with his peers from Argentina and Brazil to discuss the pipeline's progress, he said.

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