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ARGENTINA-BOLIVIA: Gas Pipeline to Boost Development, Revenues – But Not for Everyone

Marcela Valente*

BUENOS AIRES, Apr 5 2011 (IPS) - “The pipeline will carry gas to Bolivia and seven provinces in Argentina, but we who live in Campo Durán, where the pipeline starts, will not have gas,” Julio Palavecino told IPS.

Gas well drilled in 1952 in Campo Durán, in Argentina's Salta province Credit: Public domain

Gas well drilled in 1952 in Campo Durán, in Argentina's Salta province Credit: Public domain

Palavecino is the leader of a community of 140 Chané indigenous families in Campo Durán, in the northwestern Argentine province of Salta, located at one end of the 48-km Juana Azurduy natural gas pipeline that will stretch to the gas field of Madrejones, near the border town of Yacuiba in the southern Bolivian department (province) of Tarija.

The construction company “is not creating jobs and is destroying the forest, and won’t even provide us with gas,” he protested.

The pipeline is set to be completed in May.

It will then be connected to the Northeastern Gas Pipeline, which according to plans will carry gas to 163 towns in the provinces of Salta, Formosa, Chaco, Misiones, Corrientes, Entre Ríos and Santa Fe by 2013.

Unlike the pipelines built in the 1990s by private companies to transport natural gas from Argentina to neighbouring Brazil, Chile and Uruguay, the current project was designed by the government to bolster development in the country’s poorest provinces, in the north.

But the people of Campo Durán have once again been ignored, just like in the 1990s, when they witnessed the construction of the Norandino Gas Pipeline that carries gas to Chile.

“We don’t know whether the municipal government doesn’t want to build the local connection to the pipeline, or doesn’t have the funds to do so,” Palavecino said. “Not even the school, which is 150 metres from the pipeline and uses firewood year-round, will have gas.”

He has sent letters to the construction company, Servicios Vertúa, and to the municipal government, and presented four development projects that would enable the local community to benefit from the gas one way or another.

But he has not received a single response.

“Apparently our efforts are worth nothing,” he lamented. “Maybe if I had advice I would know who I should appeal to.”

Another local community that will see no benefits from the project is El Algarrobal, a village of around 40 families. “The pipeline runs right under their noses, and it never even occurred to anyone to supply them with gas. They don’t take us into account for their projects,” the indigenous leader said.

A study by the Equis consulting firm found that 36 percent of Argentina’s 40 million people have no access to the natural gas grid and depend instead on gas cylinders, kerosene or firewood.

But breaking it down by regions, nearly 100 percent of the population of the northeast – Formosa, Chaco, Misiones and Corrientes provinces – has no access to piped gas.

Households purchase 10-kg gas cylinders for cooking at a price of between four and 10 dollars, depending on whether or not the price is subsidised.

According to an estimate that was carried out in the province in Buenos Aires, if a family connected to the grid has a monthly bill of nine dollars, the equivalent consumption of subsidised gas in cylinders – which is not always available – would be 45 dollars.

Bringing development to the north

The authorities have promised to provide a gas stove to every poor household in the communities hooked up to the Northeastern Pipeline.

The gas supplies will help boost the development of the economy in the lagging northeast.

“The gas pipeline is going to have a positive social impact in the short term, in the households that use gas cylinders, which is more expensive than piped gas,” Víctor Bronstein, the president of the Centre for Studies on Energy, Politics and Society, told IPS.

But the impact on the economy will only be felt in the medium-term. “Energy supply is a basic condition for development, for the establishment of industries. But roads, suppliers, and human resources are also needed,” he pointed out.

Designed by the Federal Planning Ministry, the pipeline will stretch a total of 4,144 km – nearly 1,500 km of trunk lines and the rest branch lines.

Many local mayors see it as a major milestone.

“This is a long-held dream come true,” said Oscar Peppo, mayor of Villa Ángela, a town of 40,000 in Chaco province, after the work on the pipeline was announced.

“We are going to be integrated with the rest of the country,” said Antonio Rodas, mayor of Fontana, a Chaco town of 30,000.

More information needed

But on the Argentine side, there are aspects of the plan that are not yet clear. Estimates of the cost of the Northeastern Pipeline have varied, for example. The latest, issued by the Planning Ministry, is around six billion dollars, to which is added the 98 million dollar Juana Azurduy Pipeline.

The government tried to finance the project by means of a trust funded by a small charge on the monthly bills of natural gas consumers, but Congress voted against the proposal.

The Planning Ministry then said it would go ahead with the project anyway, by asking for loans from the Inter-American Development Bank or the Andean Development Corporation.

Nor is it clear what share will be provided by the provinces and municipalities through which the pipeline will pass.

The central government has stated that it will finance the costs “all the way to the stovetop” and that in many cases it will distribute the stoves themselves. But it is the provincial authorities who are in charge of designing the branch lines and local grids.

Across the border, meanwhile, there is uncertainty about Bolivia’s capacity to supply gas for the future pipeline.

“It’s not just a question of the quantity of reserves in Bolivia, but of the investment that the country needs to develop its gas fields, which will involve digging wells, building installations and roads, and installing compressor facilities,” Bronstein said.

According to the agreement between the two countries, sales of Bolivian gas will rise from seven million metric standard cubic metres per day (MMSCMD) to 13.5 in 2013 and to 27 in 2017.

Argentina is the second-biggest importer of natural gas from Bolivia after Brazil, which imports 27 MMSCMD.

But the Bolivian government has not provided enough information about the volume of gas in the country, Carlos Arze, a researcher at the Centre for Labour and Agrarian Development Studies (CEDLA), a non-profit research institute based in La Paz, told IPS.

In 2005, Bolivia had total reserves – proven, probable and possible – of 53 trillion cubic feet (TCF).

But in September 2010, the results of a preliminary study by the Ryder Scott Petroleum Consultants in the U.S. were leaked, indicating that proven reserves only stood at 8.3 TCF.

However, the state-run oil company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) asserted that proven reserves amounted to 12.8 TCF.

Production has declined, for example, in the Margarita gas field in Tarija, although the company that operates there, Spanish-Argentine oil firm Repsol YPF, said its capacity would grow from the current 2.3 MMSCMD to 14 over the next three years.

Arze does not rule out the possibility that Brazil’s Petrobras, the oil company with the biggest investments in Bolivia, could supply gas from Itaú gas field, which it operates in Tarija, for the pipeline to Argentina.

Bolivia will supply the gas without the liquefied by-products that are currently sold to Brazil, he explained.

A gas-to-liquids separation plant to be built in the Madrejones-Yacuiba area, at a cost of 148 million dollars, will produce between 1,169 and 2,037 metric tons per day of liquefied petroleum gas (LPG), some 2,087 barrels per day of natural gas, and 2,030 metric tons per day of ethane.

These elements will be recovered before the natural gas is transported to Argentina, for the benefit of urban areas in Bolivia, where LPG is sold at a very small profit margin.

Bolivia is not self-sufficient in gas, and imports liquefied natural gas (LNG) from Venezuela to cover domestic demand. Last year, imports amounted to 48 metric tons per day.

Bolivian gas for Bolivians?

Bolivia, one of Latin America’s biggest producers of natural gas, does not even have an up-to-date figure how many households receive piped gas.

Analyst Álvaro Ríos estimates that of the country’s total gas production of 40 MMSCMD, only 18 percent goes to the domestic market, and a mere 0.5 percent to households.

More than 50 percent of Bolivia’s 10 million people live in the country’s impoverished western highlands region, where the biggest consumers of gas are foundries and cement factories. Pipelines are needed to bring gas to western and central Bolivia from the south and the east, where the reserves are located.

But the largest pipelines carry gas to Brazil and Argentina, and the government is not carrying out the expansions needed to increase consumption by providing piped gas to homes and supplying compressed natural gas for vehicles that run on the alternative fuel.

The agreement between Buenos Aires and La Paz for the Northeastern Pipeline will increase Bolivia’s gas revenues by an estimated two billion dollars a year. The government has not yet announced specific plans for the extra income.

Gas exports are Bolivia’s main source of revenue, bringing in 1.46 billion dollars in 2008, compared to 188 million dollars in 2001.

The revenues from natural gas exports finance the government’s social programmes, such as cash transfers to pregnant women and mothers with children up to the age of two, conditional on regular checkups, monthly cash payments to families of children who stay in school, and a universal pension for the elderly.

* With additional reporting by Franz Chávez in La Paz.

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