Gas-powered integration.

• Author: Hawrylyshyn, George
• Position: Brazil/Bolivia Gas Deal

THE PRESIDENT of Bolivia called it the biggest project underway in South America. Brazilians have compared it to the Trans-Siberian pipeline and see it as the biggest and most symbolic step for MERCOSUR (Southern Cone Common Market) and other regional economic integration programs.

Popularly known as the Brazil/Bolivia Gas Deal, the project consists of a 20-year agreement to supply Bolivian natural gas to heavily industrialized southern Brazil. But this is no run of the mill petroleum futures market transaction. This is an interregional undertaking comparable in scope and significance to pipeline projects in Europe and the gas networks between the USA and Canada and Mexico.

The legal base of the agreement is the commercial contract signed by Brazilian President Itamar Franco and Bolivian President Jaime Paz Zamora in Cochabama on February 17. The contract delineates the terms by which Bolivia's state oil company, YPFB, is to sell gas to Brazil's Petrobras, over a period of two decades. But before the gas from the Bolivian fields of Santa Cruz de la Sierra can reach Sao Paulo and other consuming centers, the two countries must first build a 1,376 mile main pipeline, the cost of which is estimated at between US$1.7 and $2 billion. This main trunkline is scheduled onstream in 1996, when Bolivia will start pumping 8 million cubic meters of gas per day to Brazil for an initial period of seven years. For the La Paz government that means, for a start, an annual income of $100 million and for Brasilia it means an immediate boost of 45 percent to its domestic supply of natural gas and an important step in carrying out its policy of switching to a cleaner and cheaper source of energy.

Aside from the main gasline, the 20-year agreement will also require the laying of 1,184 kilometers (736 miles) of additional feeder and distribution pipelines in Brazil, raising the total pipe mileage to...