September 10, 2004

An Opec For South America?

By Raul Vasquez

LA PAZ, Bolivia — President Hugo Chávez’s recent election victory in Venezuela also gave momentum to one of his favorite ideas — an alliance of regional state-run energy firms that would run like a South American version of OPEC.

Called Petrosur, the energy alliance could transform global energy markets if it became fully operational. That’s certainly Chávez’s intention. His idea took center stage earlier this summer at a summit of regional leaders in Argentina.

At the end of the South American common market (Merco-sur) meeting in Puerto Iguazú, Argentine President Nestor Kirchner and Chávez together declared the “birth” of Pe-trosur. They announced a “strategic alliance” between Venezuela’s powerful state oil firm PdVSA —which governs the largest oil reserves outside of the Middle East— with Argentina’s recently created state energy company, Enarsa.

The brief accord fails to say exactly how the marriage will work, but that didn’t keep Kirchner and Chávez from making hopeful statements.

“We believe that Petrosur could become the fifth largest oil company in the world,” declared Kirchner optimistically after inviting other energy firms, particularly Brazil’s dynamic state-run Petrobras and Bolivia’s recently re-founded YPFB, to join the energy alliance.

Chávez, who on Aug. 15 survived a bitter recall referendum, made similar pronouncements at the Puerto Iguazú summit.

“(Petrosur) is one way to integrate for real, in the economic sphere,” Chavez said, touting his idea that pooling energy resources would catapult South America to worldwide influence. In South America we have the potential to become one of the globe’s power centers.”

While still a fledgling effort facing a long maze of obstacles, Petrosur (known also as Petroamérica) does hold potential.

For example, if Brazil’s Petrobras joins the alliance and Argentina and Bolivia re-nationalize their energy resources (unlikely but not impossible), Petrosur would oversee 12 percent of the world’s oil reserves and 14 percent of all oil exports, establishing a new energy powerhouse at a time when global demand (and prices) for crude continues to rise.

At the very least, Petrosur’s natural gas and oil wealth would be a valuable bargaining chip in price negotiations with buyers abroad, while perhaps attracting more large scale, comprehensive investments for speeding up the development of the region’s patchy energy infrastructure.

Already, for example, PdVSA officials confirmed they were considering buying out all of Shell Oil’s gas service stations in Argentina as part of the build-up toward Petrosur.

Other leaders see an even more promising opportunity from Petrosur.

Enrique Urquidi, Bolivian senator and current president of the Andean Community of Nations (CAN), believes Petrosur can launch the economic foundation for a real South American integration modeled on the European Union.

“(Petrosur) could dramatically alter the level of importance that the U.S. and European Union give us.” For Urquidi, the end goal is “the total integration of South America.”

Urquidi argues that in 1951 several Western European nations led by France created their own energy alliance, the European Community of Carbon and Steel, which led, 41 years later, to the European Union.

The idea of a single South American state, conceived by colonial era liberator Simon Bolivar (1783-1830), was planted long before the European Union seemed a possibility.

As many analysts point out, however, Petrosur, like any other ambitious transnational integration push, faces a host of landmines and complexities.

While the level of amity and cooperation in South America is unprecedentedly high today, few dare predict how future political or economic meltdowns in any one country would affect a long-term regional energy alliance.

Also threatening Petrosur is the unwillingness of Brazil’s Petrobras, the continent’s second largest energy firm, to join Petrosur. Because Argentina’s and Bolivia’s state companies are only seeds of potential, Petrosur needs Petrobras before it can truly claim to represent a South American energy alliance.

Petrobras’s reluctance is blamed on a conflict of interest — it is heavily invested in both Argentina and Bolivia, having swept up formerly state-owned oil wells, infrastructure and gas stations during the privatizations of the 1990s. Joining Petrosur would mean risking control over these holdings. Petrobras officials are undoubtedly telling President Luiz Inacio “Lula” da Silva to turn away, even as Lula and Chávez plan to discuss Petrosur in an upcoming meeting.

Another worry is that the United States, ever more dependent on imported oil, will intervene with trade and diplomatic pressure to prevent a potent and autonomous South American energy company from coalescing.

Chávez also believes that Petrosur can help South American entrepreneurs develop resources to challenge U.S. firms on lucrative energy contracts. He also wants it as a brake on U.S. efforts to push through a Free Trade Area of the Americas, which he fiercely opposes.

“Our new north is the south,” said Chavez at the recent summit. His statement reflects the mood among several South American heads of state, but only time will tell if Petrosur will become more than just an ambitious plan.

Raul Vasque is, a freelance journalist and photographer in Bolivia, who writes on domestic and international politics, immigration and land-use issues.

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