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Venezuela: The incongruities of gas

By Veneconomy

05.04.05 | On Monday, El Nacional published an extensive report on the chaos in Venezuela’s gas sector, in which it points out that there is a deficit of 500 million cubic feet a day and that, as a result, industry is being forced to use more costly energy sources in order to avoid shutting down operations. This is unbelievable in a country that, in 2004, had the biggest gas reserves in South America (58% of the total for the subcontinent) and ranked eighth in the world with reserves of 149.2 trillion cubic feet.

This situation is the result of the lack of a coherent, sustained policy for developing the sector that has prevailed in the country for years. The policy has been rather one of cut and thrust, of advances and about-faces when it comes to major projects such as the LNG Mariscal Sucre project (formerly Cristóbal Colon), which has been delayed for 13 years, and the pipeline to Colombia, which still has come to nothing eight years on. During his six years in office, President Hugo Chávez has spoken repeatedly of developing the gas industry. He has said, for example, that they will implement a strategy for putting Venezuela on the liquefied natural gas map thanks to the exports that should be generated by the offshore projects; there has been talk of building new networks that would take the gas to more towns and villages for domestic use; and there have been promises of incentives to encourage downstream growth in order to enhance the sector’s industrialization potential.

However, almost all these proposals have remained just that, with no concrete progress having been made so far. Venezuela has no alternative but to wait three to five years to start to see some real progress being made on the projects, which are still caught up in a political diatribe or in the very early stages. Meanwhile, neighboring countries have taken the lead and are fast becoming strong competitors for Venezuela’s future export markets.

For example, Trinidad and Tobago is planning to increase its production capacity -currently at approximately 822 million cubic feet a day- by 430 million cubic feet a day by 2006 and is considering a further increase of 1.6 billion cubic feet a day by 2011, which would make it the leading player in the future growth of the U.S. LNG gas market.

Inevitably, Venezuela will get left behind, once again. While it keeps its gas reserves underground, it will be excluded from the regasification terminals in the United States and it will pass up an excellent opportunity for harvesting the economic benefits offered by Liquefied Natural Gas exports at today’s attractive prices.

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