Latin America: gas shortfall

The presidents of Argentina, Brazil and Bolivia will meet in Buenos Aires on Friday, February 22 to try to resolve the shortfall in Bolivian gas production in the face of rising Argentine and Brazilian demand.

Bolivian President Evo Morales has already admitted that his country will have difficulty in meeting its commitment to raise its gas exports to Argentina to cover demand during the Southern Cone winter -- exports that are due to rise from around 3 million cubic metres per day to 7.7 million.  Brazil, by contrast, is receiving about 29 million cubic metres of Bolivian gas, although paying some 4.6 dollars per million BTU in comparison with 6 dollars for Argentina. 

With Bolivia admitting that output and investment will fall short, the summit will seek to agree an equitable distribution of the gas available, in order to avoid a repeat of supply cuts in Argentina last winter and the possibility of cuts in gas-generated electricity in both countries -- both also affected by low water levels at hydro plants.  Earlier this year, the Bolivian hydrocarbons minister estimated that total output would reach 42 million cubic metres per day this year, in comparison with domestic and export demand of 46 million.

Of the countries involved, Argentina faces the greatest difficulty, with gas accounting for around half of its energy matrix.  With tariffs frozen since 2002, consumption has risen by around 40% since then, while production has increased by only 2.5%.  In a bid to avoid shortages, Argentina has repeatedly cut its own gas exports to Chile, and President Cristina Fernandez de Kirchner has recently signed deals to import gas from Venezuela. 

However, in the short term, there is no relief in sight:  with the largest gas reserves in the region, Venezuela does not produce gas commercially, and there is no realistic prospect that it will do so soon.  Investments boosting gas output in either Argentina or Bolivia will take time to have an effect; lack of Bolivian output is also holding up plans to construct a 1,500-kilometre gas pipeline between the two countries, originally scheduled to open in 2006.  Irate consumers will almost certainly face gas and electricity shortages for at least a further winter.