ARGENTINA: February 25, 2008


BUENOS AIRES - The presidents of Argentina, Bolivia and Brazil failed to reach a deal Saturday to redistribute Bolivia's diminished natural gas exports and give Argentina the larger share it seeks.


Energy ministers will form a crisis group and meet again in ten days to try to reach a solution after Argentina was not able to persuade Brazil to give up some of its share of Bolivia's natural gas, Argentine Foreign Minister Jorge Taiana told reporters.

Presidents Cristina Fernandez of Argentina, Evo Morales of Bolivia and Luiz Inacio Lula da Silva of Brazil met at the presidential residence in a Buenos Aires suburb to try to reapportion the natural gas exports.

"In 10 days the energy ministers will meet in La Paz to seek a solution," Jose Sergio Gabrielli, president of Brazilian state oil firm Petrobras, told reporters after the meeting.

"Argentina asked for 1 million cubic meters of natural gas per day (of those Brazil consumes," but he said Brazil is only willing to sell electric power to Argentina during the winter months.

Bolivia, which also has growing energy demands, has been unable to keep up with promised levels of natural gas exports to its two neighbors, the largest economies in South America.

Argentina and Brazil both produce oil and gas, but not enough for their power grids and factories during peak periods. Bolivian natural gas is a key energy source for Sao Paulo, the hub of Brazil's industrial production.

Galloping economic growth on the back of high prices for raw materials such as Argentine and Brazilian soy, Chilean copper and Bolivian natural gas, have made looming energy shortages a concern in much of South America.

Morales said in an interview published Saturday in Clarin newspaper that he was open to having Brazil help out Argentina by letting it have more natural gas during times of potential shortages such as in the southern hemisphere winter in June and July.

But Brazilian ministers said they have to prioritize the needs of their own country, which faces the risk of power shortages in coming years.

Argentine factories and consumers want more power and fuel as the country enters a sixth straight year of robust expansion.

In Argentina, supply has not kept up with the growing demand because of low energy sector investment due to state price controls that keep consumer power prices very low since the 2001-2002 economic crisis.

Argentina's energy grid is highly dependent on natural gas-fueled plants.

Bolivia nationalized its energy industry in 2006 and investment has tailed off, so it is not meeting commitments to send more than 30 million cubic meters a day of natural gas to Brazil and 7.7 million cubic meters a day to Argentina.

Brazil is getting some 27 million to 29 million cubic meters per day, while Argentina is barely getting 3 million.

Petrobras is the biggest foreign investor in Bolivia and the biggest producer of natural gas in that country, making it tough for Bolivia to renegotiate its supply contracts to Brazil to help out Argentina.

(Reporting by Walter Bianchi, writing by Fiona Ortiz)


Story by Walter Bianchi


REUTERS NEWS SERVICE