Brazil at a Crossroad on How to Deal with Current Energy Crisis

Brazil's Itaipu hydroelectric plant Brazil's current "energy crisis" should extend for "at least another four years," according to Brazilian President, Luiz Inácio Lula da Silva. The problem should affect both Brazil and Argentina since only then, Bolivia will be producing sufficient natural gas to supply domestic and neighboring markets.

Interviewed by the Argentine political analyst Joaquin Morales Solá,  Lula argued that "since Bolivia will only reach a 73 million cubic meters daily gas production in 2012, from now on we'll have to stretch our resources and minds to satisfy markets' demand", admitted the Brazilian president.

However he added that the energy crisis is global and "obviously affects Argentina and Brazil among other countries."

Last Saturday the presidents of Argentina, Brazil and Bolivia held a summit in Buenos Aires to decide how to redistribute insufficient gas resources for the coming winter. Argentina and Brazil have gas provision contracts signed with Bolivia, but the lion's share belongs to the industrial state of São Paulo and according to Petrobras CEO Gabrielli "there's no way Brazil can afford to give away one molecule of gas."

However president Lula did offer Argentina 200 MW of electricity, in energy terms equivalent to a million cubic meters of natural gas, which was Mrs. Kirchner request to Brazil.

In the interview Lula said that Brazil's economy for the last 20 years had not expanded at the current rate and therefore previous administrations had not taken the necessary precautions to anticipate "current energy conditions" to ensure growth and possibly "that is what is happening now in Argentina, I imagine."

"During the summit I told President Cristina Fernandez that the current energy problems are not temporary but structural and there was no other way out than with urgent, massive investments in the sector," revealed the Brazilian president.

As to the joint committee to deal with the energy situation Lula said that it would address the structural changes in the current energy models and to do this "leaders must first ask themselves about the hydro and thermo electric potential; if we should convert to natural gas (a resource which Brazil does not have) or choose gas oil, which is very expensive and contaminates the planet."

"That's the big challenge for the next four years", underlined the Brazilian president.

Furthermore Lula emphasized that there's no point or time looking back and complaining about what was not done before, but rather "it's time to begin acting on what we will be needing tomorrow" so that both Argentina and Brazil can provide investors with a positive and reliable perspective.

Meanwhile from La Paz Bolivian president Evo Morales confirmed that a second regional energy summit with Cristina Fernandez de Kirchner and Lula is scheduled for the end of March.

However he also pointed out that he was hopeful Brazil's Petrobras would comply with its investment commitment of a billion US dollars to the Bolivian oil and gas industry in the coming eighteen months.

Bolivian vice president Alvaro Garcia announced Tuesday that the expanded gas provision contract with Argentina will have to be reviewed because the country won't be able to comply "until at least 2010."

Garcia attributes the shortage to the boycott imposed on Bolivia by international oil and gas corporations following the country's hydrocarbons resources nationalization process of May 2006.

"We hit them hard, they felt it and reacted: some with a boycott, others putting obstacles, refusing to help and some even threatening us. Finally they ceased all investments in the industry and that is why gas production has remained stable," said Garcia.

According to the expanded gas provision accord with Argentina, Bolivia must increase the current supply to 7.7 million cubic meters per day by 2010, 16 million in 2011 and 27.7 million in 2016.

However Garcia revealed that Bolivia will be expanding its current production by 2 to 2.5 million cubic meters at the end of 2008 and 4 to 5 million by the end of 2009, if Petrobras effectively invests the one billion US dollars promised and an agreement can be reached with Total for the exploitation of a rich hydrocarbons resource to the southeast of Bolivia, next to Itaú in Brazil.

Mercopress

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