Oil Wars

Although I haven't said anything about it previously the governments of Venezuela, Brazil and Argentina have been discussing building a very long pipeline to ship Venezuelan (and maybe Bolivian?) natural gas to the growing markets of Brazil and Argentina. While in principal it may seem like a good idea I've always had questions about it on a cost basis. Its said to cost around $25 billion to build and would all of that expense be recovered? Especially given that both Brazil and Argentina are at best moderate income countries with limited energy markets. Further, the upfront investment in this thing is huge - who will foot that bill? Regional solidarity is good and important but projects still have to make economic sense too. I'm not saying this might not being an excellent project, it may well be. But questions have to be answered first.

And today yet more questions came up, this time regarding possible ecological problems resulting from the pipeline construction:

Environmentalists were caught off guard when South American leaders announced plans to build a massive natural gas pipeline through the Amazon rain forest.

Proponents say the $20 billion project, still in early planning stages, will help satisfy the growing regional demand for gas and help make South America less dependent on outside sources.

But environmentalists say it could damage part of the Amazon — the world's largest wilderness — by polluting waterways, destroying trees and creating roads that could draw ranchers and loggers.

Venezuelan President Hugo Chavez says the pipeline is a central part of his efforts to reduce dependence on the United States and its pressure for free market policies known as the Washington Consensus.

It's "the beginning of the South American consensus," Chavez has said. "This pipeline is vital for us."

At a meeting in Brazil's capital earlier this month, the presidents of Venezuela, Argentina and Brazil promised to come up with the first set of preliminary studies for the 5,000-mile pipeline, stretching from Venezuela to Argentina.

Preliminary plans were promised for a March 10 meeting of the three leaders in Argentina.

Roberto Smeraldi of the Friends of the Earth-Brazil said the short timetable seemed unworkable.

"A government like Brazil's can't do similar studies for projects covering (310 miles) after 10 years of discussion, and now they are going to manage in-depth studies for a (5,000-mile) project in six months?" he said.

Smeraldi said he believed the pipeline theoretically could be built with minimal impact to the environment, but the cost would be prohibitive.

Chavez has said he wants the continent's state-owned oil companies to build and oversee the pipeline.

He said Venezuela and Bolivia "have gas for 200 years" and can supply fuel to Brazil and Argentina, where there is increasing demand for power generation, cooking gas and cars.

The Venezuelan leader estimated the pipeline would cost $20 billion to $25 billion, but Smeraldi said strict adherence to Brazil's tough environmental laws would double the cost.

Brazil's Environment Ministry referred Associated Press calls for comment to the country's environmental protection agency, which would oversee licensing of the project. However, press officer Sandra Sato declined to comment, saying "We can't take a position until there is a request for licensing."

Glenn Switkes of the International Rivers Network said if the pipeline were ever built, it would inevitably foul the environment.

"There are a lot of issues involved: direct construction, the question of drainage, all the roads that need to be built," Switkes said.

Roads are particularly devastating to the Amazon rain forest. They allow ranchers, loggers and miners to flood into areas that previously were inaccessible.

Environmentalists estimate that each road cut into the rain forest causes destruction of the forest for 30 miles on each side of the road within a few years.

"They always say they're going to fly in the pipes and not build roads, but they never do that," Switkes said. "Then they say that the pipeline will go around important ecological areas, but they never do that either because it gets too expensive."

Brazil's rain forest is as big as Western Europe and is thought to contain at least 30 percent of all plant and animal species on the planet. Experts say as much as 20 percent of its 1.6 million square miles has already been destroyed by development, logging and farming.

Analysts also questioned the economic wisdom of the plan, especially after Brazil's government-run oil company announced it would invest $18 billion to develop the country's natural gas fields.

"Both Brazil and Argentina have gas fields large enough to cover their own domestic demands. I don't see why they would like to undertake this hugely costly project, with money they don't have, not to mention environment costs," said Norman Gall, executive director of the Fernand Braudel Institute of World Economy.

The plan also seems to conflict with other projects proposed for the region.

"If the government goes ahead with this pipeline, it will have no money for any other type of investment," Smeraldi said.

These definitely look like the kind of very legitimate concerns that should be thoroughly examined BEFORE anything is built.
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