SUNS4372 Thursday 11 February 1999

Energy: Bolivia helps quench Brazil's insatiable thirst



Rio de Janeiro, Feb 9 (IPS/Mario Osava) -- The inauguration of the Bolivia-Brazil gas pipeline Tuesday confirmed the latter's thirst for energy from its South American neighbours, while its financial crisis
threatens to drag them into economic recession.

Bolivia joins Argentina, Paraguay and Venezuela as the great providers of electricity, oil and natural gas, consumption of which traditionally increases at a rate far faster than the economy in general in Brazil.

Paraguay kicked off the process in the seventies, when it ceded its rights on the Parana river for the construction of the biggest hydroelectric centre in the world, the binational Itaipu.
Formally speaking, half of Itaipu belongs to Paraguay, but nearly all the energy generated is consumed by Brazil, at a price always considered unfairly low by the opposition and Paraguayan nationalist sectors.

Argentina and Venezuela have recently become the main sources of oil imports for Brazil, substituting supplies from the Arab countries. Furthermore, they are preparing to supply electricity to the extreme north and south of the country.

And now, Bolivia is launching a new phase of this South American energy integration where all lines lead to the Brazilian market.

Brazil aims to change its energy patterns increasing natural gas supplies from two to ten percent in less than a decade.To do this, other gas pipelines planned by private concerns promise to supply Brazil's south with Argentinean gas mainly to be used in electricity generation.

The 3,069 kilometres of pipeline cost around two billion dollars to build, five sixths of its length running under Brazilian territory.

In various meetings with his colleague, Alberto Fujimori, President Fernando Henrique Cardoso showed Brazil's interest in the Camisea natural gas complex in Peru as a source for supplies for the western Amazon.

Despite vast supplies of water, Brazil's Amazonia is a market for gas-generated electricity. Its rivers are immense but slope very little. Hydroelectric plants here would require flooding of great extensions of forests, generating more environmental problems than energy.

But the new projects will probably suffer delays due to the economic recession in Brazil, an inevitable effect of the uncontrolled devaluation of its currency since January 13.

Importation of Bolivian gas will have to overcome various difficulties in order to conquer the market, at least in the first few years. With the economy in decline, the perspective of energy shortages was replaced by expectations of supply exceeding demand.

Hence several thermoelectric centres along the length of the pipeline which were planning to consume Bolivian gas are either delayed or have suspended action.

The project, a dream which has taken more than twenty years to become reality, was born at a bad time, said Edmilson dos Santos, energy expert and professor at the University of Sao Paulo.

Devaluation of the real made imported gas more expensive, while international oil prices fell also tumbled, improving the competitivity of derivates for industrial use.

Furthermore, the privatisation of the Sao Paulo Gas Company (Comgs), set for April, was delayed - this company was to be the distributor of the new fuel in the area of greatest consumption, Sao Paulo state.

As a result, the brakes were placed on greater investment in a distribution network which would allow the gas to be sold to a broader market.

In any case, gas is still cheaper than industrial oil and better for the environment, it also allows for better quality in production in some products, like ceramics and chemicals, said Mauro Arce, Energy secretary for Sao Paulo state.

Comgs rejects pessimistic evaluations in a study which lists 233 big companies in the metropolitan region of Sao Paulo and nearby industrial centres, interested in substituting oil for natural gas in its activities.

This group alone represents an immediate potential consumption of five million cubic metres of gas per day. The state of Sao Paulo must receive half initial imports of eight million cubic metres per day. For the year 2000 its demand could reach 14.5 million, said Comgs.

The Bolivia-Brazil gas pipeline is "an example of real economy" and proves the country is still advancing, said President Cardoso when inaugurating the work, condemning the "catastrophism" of those who let themselves be frightened by "temporary" financial turbulence.