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SOUTH AMERICAN ENERGY MARKETS DAILY ROUNDUP (May 5, 2009): Three companies bid for construction of $250m subsea pipeline

May 5, 2009

South American Energy Markets (SAEM) publishes a daily roundup of the top-five stories affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Daily Roundup appears from Monday through Friday and is published by noon London time.

Tuesday, May 5, 2009

ARGENTINA/PIPELINE

Three companies have presented bids to build a 37.2km subsea pipeline that will interconnect the island of Tierra del Fuego with mainland Argentina, reports Buenos Aires daily Clarin, citing gas regulator Enargas sources. The bids were made by Saipem, Global Industries and Odebrecht of Brazil. The winner of the tender will sign in June with the energy secretariat the contract to build the Transmagallanico pipeline. The cost of the project is estimated at $250 million, according to a federal planning ministry source. COMMENT: The new pipeline, which will have a throughput capacity of 13 million cu m/day, will play an important role in bringing more gas from Tierra del Fuego to gas-starved mainland Argentina.  The offshore fields of Teirra del Fuego presently supply 9 million cu m/day. The Transmagallanico was originally supposed to be operational in Southern Hemisphere winter 2009. 

BOLIVIA-BRAZIL/GAS SUPPLIES

In a brief published on Monday by SAEM,  Petrobras’ energy and gas director Maria das Gracas Foster announced that Brazil will begin to import from Bolivia up to 30 million cu m/day within 10-15 days (see South American Energy Markets Daily Roundup, May 4, 2009). An analyst that spoke recently to SAEM said that while Brazil has a surplus in gas, matters can change if a drought occurs and undermines hydropower output. While this was the cause of the 2001-2002 power crisis,  very little rainfall has fallen in southern Brazil (Parana, Santa Catarina and Rio Grande do Sul). Power market operator ONS said that in April the water levels of dams in the South were at 38.3% versus 83.92% in the Southeast-Central-West, 99.06% in the Northeast and 98.76% in the Northern region.  COMMENT: Even though Bolivia will be able to import more gas to Brazil, it does not mean that matters will be the same as in 2008 due to lower global energy prices. Gas export prices to Brazil and Argentina fell in the second quarter by half to about $4.4/million BTU from last year’s highs. They are expected to fall further in the third quarter. 

VENEZUELA/FINANCIAL CRISIS

Owing to a plunge in global oil prices, which have exacerbated PdVSA’s financial problems, has not only forced the Venezuelan state-owned energy company to default on payments to subcontractors, but also to private companies that are supposed to be paid in US dollars by its marketing subsidiary CNV, reports Caracas-based daily El Universo.  PdVSA is soon planning to issue $2 billion in debt to alleviate its cash-flow problems. COMMENT: Even though Venezuela is blessed with oil and gas reserves, such wealth can also turn into a financial nightmare during a downturn. The plunge in oil global prices and PdVSA’s financial woes bring new risks to Venezuelan politics. 

BOLIVIA-CHILE-PERU/GEOPOLITICAL DISPUTE

Former US President Jimmy Carter, who praised the social and political reforms made by Evo Morales’ government, expressed support for Bolivia’s claim to a direct outlet to the Pacific Ocean, reports La Paz daily La Patria. Carter, who visited Bolivia and met with President Morales over the weekend, said that he was hopeful that the landlocked country, together with Chile and Peru, would find a solution. COMMENT: Even though it would be a good matter to resolve the old geopolitical dispute that dates back to the late-19th century, it is another matter if anything will happen on this front. Apart from the social and political reforms of Morales’ government, his name in the country’s history would be remembered for eternity if he were successful in getting an enclave or maritime corridor to the Pacific Ocean. 

ARGENTINA/NUCLEAR

(Originally published on May 4, 2009) Argentina is looking into the possibility of building a fourth nuclear plant “in less than a year” after Atucha I, Embalse and Atucha II (under construction), federal planning minister, Julio De Vido, was quoted as saying in state-owned news agency Telam. The minister said that construction of Atucha II, which was originally supposed to come onstream in the 1980s, is “on schedule.” COMMENT: Plans to build a fourth nuclear plant reveal how critical Argentina’s energy situation is owing to declining gas and oil reserves. Why not first finish the long-overdue Atucha II plant and then begin construction of a fourth nuclear installation? Taking into account the government’s ever-worsening economic problems, there are question marks over whether it has an extra $1.8 billion to complete Atucha II.

These briefs can be reprinted as long as the source is cited.

If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.

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