MercoPress. South Atlantic News Agency

Mercosur natural gas integration

Brazilian Mines and Energy Minister Dilma Rousseff emphasized the significance of natural gas integration between Bolivia, Argentina and Brazil.

"There are great advantages both in the supply of natural gas and in the economic development that will stem from this integration for the countries involved", said Ms. Rousseff addressing the Latinamerican and Caribbean Gas and Electricity Congress in Rio do Janeiro.

Ms. Rousseff pointed out to the recent agreement for the construction of a natural gas and chemical processing pole in the common border with Bolivia as an example of her statement.

The Brazilian minister also revealed that President Lula da Silva administration is planning to add another 4,400 kilometres the current gas network by extending pipelines to the Amazon area and the more industrialized southern part of the country.

However she pointed out that any gas integration between Argentina, Brazil and Bolivia must be preceded by a regulatory framework taking into account different economic situations and monetary policies.

Mercosur countries are currently facing a serious energy shortage speared by Argentina's lack of investment during the last few years which has forced natural gas supply reductions to Chile, Uruguay and Argentina's own industry.

Brazil so far has managed to satisfy demand but does not have sufficient surplus to help its energy short neighbours. Actually Brazil suffered a similar situation two years ago when a prolonged drought that left most reservoirs half empty caused a collapse in hydroelectricity generation.

However the underlying factor according to international analysts is not the lack of resources but incentives and market prices. In Argentina public utilities rates remain frozen since the devaluation of the currency in December 2001 and in Brazil private investors have long feared that currency mismatch would imperil their business. That is liabilities in foreign currency and revenue in local currency, which can be conditioned to political conditions.