By an OGJ correspondent
PARIS, Mar. 17 --A general lack of markets and pipeline infrastructure is the main reason South America has scarcely developed its abundant natural gas resources, said officials of Paris-based International Energy Agency in a recent study.
Few South American countries have both large natural gas reserves and correspondingly large potential domestic markets to justify the high upfront costs to develop these reserves and to build the transportation network.
Only Argentina has both massive domestic gas reserves and a mature gas market, with a well-developed infrastructure, the IEA study noted. Bolivia, Peru, and Trinidad and Tobago have large reserves but limited gas markets. Brazil and Chile have large populations whose annual gas demand is growing at double-digit percentages; yet they depend primarily on imports.
Venezuela and Colombia are constrained in the development of associated gas reserves that are dependent on oil production. "It is doubtful that their domestic gas markets alone will provide enough opportunities and incentives to spur exploration and production of nonassociated gas," concluded the IEA study. With 91% of its proven gas reserves associated with oil, Venezuela is particularly hampered by its oil production quota as a member of the Organization of Petroleum Exporting Countries, said the study.
Except for Argentina where gas has high penetration of all market sectors, most South American countries use gas primarily to fuel industry and the energy production sector itself. Residential and commercial markets are limited, with no need for space heating in most of the continent. But opportunities could develop for summer cooling, said IEA officials. On the other hand, the use of compressed natural gas (CNG) as a transport fuel is expanding rapidly; Argentina is a world leader in that field.
Large and well-developed hydropower resources also have a limiting effect on gas use for power generation in South America, the study said. But it also found that the recent drought in Argentina, Brazil, Chile, and Venezuela, combined with the high cost of developing more hydro power plants, have caused several South American countries to diversify power generation towards gas.
The report projects that future South American gas demand will be driven largely by increased gas use for electricity: In 1995-2000, gas-fired power generation grew by 8.4%/year in South America, compared with 4.5% annual growth for total power generation. The study also sees the possibility for further substitution of gas for oil in the industrial sector.
Meanwhile, it said, gas pipeline interconnections are most advanced in the Southern Cone, encompassing parts of Brazil, Argentina, Chile, Bolivia, Paraguay, and Uruguay where most South American population and industry is located and where energy demand is highest. Both Argentina and Bolivia have abundant nonassociated gas reserves that they want to export to neighboring countries in this area.
In 2001, gas trade in the Southern Cone amounted to 9 billion cu m, 16% of the area's marketed gas production.
Pipelines, LNG plans
Pipeline connections among the Andean countriesBolivia, Peru, Ecuador, Colombia, and Venezuelawill be slower to materialize, the study said. The only project currently under study is a Colombia-to-Venezuela gas link.
While the large gas reserves in the north are too far away to pipe to the Southern Cone, the study found that LNG projects have a promising future.
Trinidad and Tobago is well ahead in LNG trains with two in operation and three more planned by 2005, making Trinidad and Tobago one of the largest LNG suppliers of the Atlantic market.
Bolivia, with its enormous gas reserves, is exploring the possibility of exporting LNG to the west coast of Mexico, via Chile or Peru. Peruvian gas from the giant Camisea field also may one day be exported as LNG, because the local market is small and exports to Brazil must compete against Bolivia's abundant gas supplies, IEA reported.
There are plans to build an LNG import terminal on Brazil's eastern coast to receive gas from Trinidad and Tobago, Nigeria, or, eventually, Venezuela.
The trend towards increased gas production, consumption, and trade is expected to continue, said the IEA study, albeit at a slower rate due to Argentina's financial crisis and its effect on the investment climate in South America as a whole.