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NAFTA & Inter-American Trade Monitor
Produced by the Institute for Agriculture and Trade Policy
October 6, 1995
Volume 2, Number 26
North American and European energy companies are investing in a network of natural gas pipelines across the continent, planning to take advantage of both vast untapped natural-gas fields and growing Latin American needs for new, clean fuel supplies. Argentina, Peru and Bolivia are rich in natural gas, while Chile and Brazil, with comparatively little gas of their own, have fast-growing economies that offer markets for gas. U.S. electric companies also plan to build power plants in Chile in the near future.
The Bolivian government has begun a privatization process that will double the net worth of Yacimientos Petroliferos Fiscales Bolivianos (YPFB), the state-owned oil firm, and transfer its administration and half of its share to a private investor. No private Bolivian firm will be able to compete, since the Bolivian government demands that bidders have a net worth of at least $500 million. YPFB and the Brazilian Petrobras are negotiating final details of a sale of Bolivian gas to supply the industrial market of Sao Paulo, including construction of a 2,200 kilometer pipeline that will cost more than $2 billion. So far, the bidders for YPFB include U.S., Argentine, Brazilian, Canadian, Dutch, Spanish, and French firms, and the Brazilian branch of British Gas.
Argentina and the United Kingdom have reached a tentative agreement on oil exploration and exploitation in disputed waters around the Falkland Islands. Britain and Argentina fought a 10-week war over the Falkland Islands, called the Malvinas by Argentina, in 1982. Argentina still claims the territory, but has put aside its claim of sovereignty to work out business arrangements.
The framework agreement on oil will allow Argentine companies to participate in joint ventures in the disputed waters, but the Argentine government will draw no royalties from the explorations. Revenue from the oil activity in the so-called Cooperation Zone will be split equally between Britain and Argentina, which will require modification to the Argentine hydrocarbons law. According to some experts, the Falklands could have as much oil as the North Sea.
"Untapped Latin Gas Fields Lure N. American, European Investors," REUTERS (in JOURNAL OF COMMERCE), September 15, 1995; Juan Carlos Rocha, "Oil-Bolivia: Privatisation Process Seduces International Giants," INTERPRESS SERVICE, August 23, 1995; David Pilling and Jimmy Burns, "Oil Cash for Argentina," FINANCIAL TIMES, September 20, 1995; "UK and Argentina, One-Time Enemies, Draft Falklands Pact," REUTERS (in JOURNAL OF COMMERCE), September 18, 1995.
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