~-Oiolade LATIM AMERICAN ENEIUlY ORGA/llZATIOH Energ~y Mlagazmne O) • Year 22, number 4, October-November-December 1998
Organización Latinoamericana de Energía ontents
Editorial
2 Seminar on Energy Risk Management: Futures Markets
7 Seminar on Sustainable Energy for Restructured Markets
16 Energy Reform: Key Element for the Economic and lnstitutional Transformation of the Dominican Republic
22 Seminar on Modernization of the Electric Power Subsector in Latín America and the Caribbean
30 Energy News
32 Energy Statistics
36 Notes
Calendar of Events
Th~ Encrgy Mcigo.z1ne is a qul'lrtedy publlcnuon issucd by che Pcrmancnt S~crccarint oí thc latin Amerrean Encrgy Org:uil1ntion (OLA.DE). undcr che supervlslon of its Editorial Board. The s1gned ~!'liclcs are 1hc $Ole responsibiliiy of their' nuchors and do oot neces.sarily roflact tho ofílctal poslcioo oí the Organti.itlon cr its mcmbor coumries. OLAOE permits thc rcproducuon oí thc prosoot :u·rldcs. in part 01· in fulf, as wef as illustrations. ns long as the source 1$ quoeed.
EDITOR-IN-CHIEF Luiz A M. da Fonseca lxcculive Secrewry, 01.ADE
EDITORIAL BOARD Ana lia Duco and Lidia Mad•s.Argentina/Gloria Villa. Costa Rica/Pedro Morales Carballo, Cuba Dieuseul Anglade, Haiti/Ricardo Samanlego Breach, Mexico/David Small, Trinidad and Tobago Cristina Mattos. Uruguay
EDITOR Gustavo Martinez
PHOTOGRAPHS Technical Secretariat of the Office of the President of the Domlnkan Republic. Eliana Fernandes/Petrobros, lmage Bank
Latín American Energy Organizatíon Avc.Anecmo lose de Sucre NS8·63 & Pcrnández Salvador. OLAOE Suilding. Sector San Carlos • P.O. Box l 7~11-06413. Quito. Ecuador· Phones: (593·2) 597-995/598.122 Fax: (593-2) 5)9.684 • E·maH: olade 1 @olade.oo-g.e< ISBN 02544.845
Organización Latinoamericana de Energía Editorial
The countries of Latín America and The present edition oí the Energy the Caribbean, at differing degrees of Magazine providcs a surnrnarv of thc intensity, have been engaged in issues and conclusions of the principal events oí Enerlac '98: the restructuring their energy sector. The pre-Coníerencc Seminar on Energy element that they share in this process Risk Management and Futures is the promotion of widcr prívate- Markcts¡ the Scminar on Sustainable sector partíciparton in activities Energy for Resrructured Markets: and traditionally conducted by the State. the Seminar on ModerniLation of thc Elcctric Power Subsecior in Latín As part of thcse efforts, new legal America and the Caribbean. framcworks have been csrablishcd and national regularory institutions Thanks success to the sponsorship and havo been created or consolldated, participation of thc lnter-American thus fostering an environment of Oevelopment Bank (1 í)(l), thc conlidcnce and stability, which in European Commission, and thc World turn is luring ínvestment to the sector ílnnk, as well as thc support of various major cornpanies involvcd in the and contributing to its sustainahility, regional and world cnergy sector, as well as improving energv scrvice Enerlac '98 was a rcsounding succoss. to users. ·1 he kcv factor ensuring compl lance Over thc last few years, 01.ADE has with the objcciivcs of Enerlac '98 and been studying the evotution of rhcse its success was thc support oí the processes and is determined to governmcnt and public and privare quantilv their results as its institutions of thc Coníerence's host contribution to thc dovelopment of counrry, the Oominican Republic, thc region's energy sector. which cxtensively promoted the cvent with the leadership oí the In this context, the Fourth Energy Technical Secrctariat oí the Officc oí Conference of Latín America and the thc Presiden! of thc Republic. Caribbean iEnerlac '98) was hcld in The Dominie<111 Republic, in addition, Santo Domingo, the Dominican aroused the interest oí those Republic, on November ·¡ 6·'19, ·1998. participating in Enerlac '98 for the lts objectives were to analvze the important reforms it is promoting in current status and prospccts oí the country's electric powcr regional energv sector transformation subsector, which is thc subject of the processes and their insertion in the spotlight section of the Energy framework of globalization and Magazine's present issue. sustainable development and to promete business and investments in the energy sector of Latín América Luiz A.M. da Fonseca and the Caribbean. Executive Secrela_ry
Organización Latinoamericana de Energía eforc the formal open ing oí the Fourth Encrgy Conícrcncc of Latín Amcríca and rhe Caribbean (Enerlac '98), a pre-Confcronce semi nar íocusi ng on Energy Sector Risk Management: Futures 1\A 2 Organización Latinoamericana de Energía l.3tin Arnerk.an Encrm,1 Otganl:a,t10;1 • OlADE The fundamental objective degree oí securitv and are resorting, with oí the event was to increasingly grearer coníidoncc, to thcsc contrihutc, with thc cxchango mcchanisms, of experienccs. to a greater understandlng o( fu tu res markets In this contexr. il is now Ieasible lO train skllled in the wide-ranning market o( tearns, who by using instrurnents for the analvsis Latín America and the Caribbean. and rnanagement of financia! opcrauons. which have been lacilitatcd by tho outbreak oí new lt is ovídcnt that, al prcscnt, unccrtainty tcchnologies, can provide sophisticated and characterizes markets in general and financia! and accurare risk assessrnents. energy markcts in particular. Bccausc of this, it is ncccssarv to find the appropriate mechan ísms to During the Serninar, the experiences of rhe Ncw reduce the vol a ti 1 ity of prices. interest rates, and York Mercantile Exchange (NYMEX), Norway and exchange rates on the energy market. Sweden, the Brazilian state oíl cornpanv Petróleo Brasi leí ro (Petrobras), the Mexican starc oi 1 lnternational energy prices, especially those for oíl company Petróleos Mexicanos (PEMEX), the and producrs, manifcst sharp and constant Vcnezuclan oil state company Petróleos de fluctuations, which are a risk íor both producers and Venezuela, S.r\. (PDVSA), and the Electric Power consumers. Because of this, sorne companies, both Regulaticn Entity of Argentina (ENRE), were public and prívate, find that energy fururcs market presentad. mechanisms provide them with an acceptahle 3 Organización Latinoamericana de Energía NYMEX emphasized the strategy As a result of this experience. the of providing advisorv services Serninar highlightecl the to natíonal, provincial (statc), ímportance of prornoting and municipal govemrnents. incentive programs to distribute Regardi ng this, it described the both earnings and losses with case of the State of Texas, which end-users and providcd tho in 1 'J91 appl ied coverage for example oí 1 he Staic oí Delawarc. which providcs risk coverage for its heating fuels. u indicated that one of the major arlvantagos of 1 h is procedo re in vol ves the granting of certainty to the approved budget for price Iluctuations that might occur. NYMEX also underscored the tmportancc of usi ng standard- ized contracts in order to ensure the effk.loncy that chamcrnrizcs ncgotiatlons in futuros markors, whcrc rhcrc is no time to discuss nt grc íhe experience of Norway and Swcdcn '1S pionccrs oí the inclusion oí the electric power subscctor in futuros markcis is of t he utmost imcrcsr. For (wo royal tv earn i ngs of the srate vears now, thcse [wo cou ntrics cornpany. lt also Iocused on the havo been worki ng togcthcr gas markcr. which has been on this, and as of 1999 the involved in risk management and actions of the other Scandinav- occasionally has unburdened its ian counrrics will be opcrations on ruturcs markots, incorporated. sinco its dcrcgulanon. 4 Organización Latinoamericana de Energía Lut:n t\1neric.:c:1n Eut::rgy Ory.inizdtion • OLADE The experience of Norway and are the so-cal lecl col lars and Sweclen highlight the fact that swaps. both the plannecl solution and the market solution minimize The Mexican oil state companv, short-run marginal costs. which PEMEX, considers rhar prices, is val id (or investments but not credits, exchange rates, tax for daily financia! operatlons. pavmenrs, and project lags are The latter are supported by spot the company's principal risks. In tariffs, which is not the case tor this situation, the handling of thosc derorm inecl al a distanco. asset and liability risks (amount, Neverrheless. the Scandinavians, rnaturity, and toreign currcncy) is bccause tbev are pioneors in the vcry intcrcsting. In this case, thc installation of futuros markets in question is: vvhat is rhe cosr- bonofit ratio oí incomc the electric power sector, have J 5 Organización Latinoamericana de Energía paying a pricc (or certainty. anisrns Iacilitates the rnanage arca. Othcrwisc. two tvpes oí VVhen distributors make spot ment of price unccrta i nty, losses can occur: those stern pu rebases at the sea son prir:e providos flcxibility in nego- ming from ignorance oí (forecast and stabilizcd spot uations, perrnits prices to reflect operations and those involving pricc) by quarter. the operaticn and activare the sector in local specu lation. that is, the hedge should be covered by the ful u res capital markets, and perforrns as ratio. Oi market. a base tool to avoicl unexpected changes in the company. At the end oí the Sem inar, a round table was conductcd with ll was also underscored rhat it is the parucipation oí ali the necessary to train professionols speakers. At this ti me, it was who know about the functioning emphasizcd that the use of and scope of the new various íuíurcs market mech- technologies developed in rhís 1 Natural gas . Energv. elficiency lliíiiiiiii:írz.=::..c.:o~w~e~r__,Pl a~"~"~in~g.__~~-- Audíts • Latin America • European Unlon • Easrern Europe We carry out research for crean, non·1>olh11ing, and e11viro11me111a11y lriendly energy. We are promoling indus1ty, bringlng it closer to me l11ture. A nnere lull er premlse. A Iulure lull or energy. l'EVE ~ Ente Vasco de la Energia T1-L: • 34 ~4 43!, SG 00 f.ax: • 34 94 4?'1 9' 33 $ • 1H~ol. 11)lt)fl'IOto~r•.-il(¡j1.-•v(:.(::: 6 Organización Latinoamericana de Energía L.c.~tin ."\:l'li'eñcao.;t:r:iergy or9 Organización Latinoamericana de Energía and the generation of clean alternatives for develo pi ng Human develop111e11t is not energy. Signature of the Kyoto sustainable energv resourccs in necessari ly correlated with per Protocol in Decernber 1997 and the new markets that are being capita GDP. The correlation the COP-4 Meeting in Buenos developed in Latín Arnerica and manifest in social developrncnl Aires in Novernber ·19913 the Caribhean. Thc second indicators does not merely highlighted rhe irnportance of the addressed experiences i 11 the dcpend on the level oí eificient use oí energy and developrnenr of cncrgv service produclion and average income, rcncwablcs for environrnental compan ies (ESCOs) and energv but rather on othcr factors, conservation. cfficicncy worldwide, especially among which the most notcworthy is a social investment i 11 Latín Ame rica and rhe t.atín Ameríca and the Caribbean policy. Caribbean. has a very high renewable encrgv porcntíaí, ospccially hvdroenergv In the future, conccrns about Afterwards, íour case studies of and geothermal energy. developmcnt and its different renewable energy Likcwise, thore is a possibility oí sustainability will continue to be developmerus i 11 resrrucru red econornical ly usi ng smal lscale cliffcrcnt dcpcnding on the mar were pres en 1 renewable energy sourccs. such kets ed. rcgions and cou11tries involvccl, as small hvdropower plnnts, involving georhcrmal cncrgy, for clifferent reasons. Whereas wind energy, and photovolraic remoto cncrgv servíces in rural lhc world as a whole fe;irs cncrgy to meet the needs of a áreas, solar energy, and climate changc, thc decline of high share oí the rural populatlon bydropowor. fossil rcsourccs, and the loss of that has no acccss to modern biodiversity, the prevai 1 i ng energy, In addition, programs for Fin;illy, with rho participation of concem of Latín /\merica and the the efíicicnl use oí energy by the 1013, OLADE, tlw vvorld Bank, Caribbean is povcrty a11d the cnduser is one of the most the U .S. Dopartmcnt of Energy overall cleplclio11 oí ils n•ltur.il attractive alrcrnnrívos 1·0 mcct thc (DOE), REINUSAID, and thc resourc:es. population's energv require European Commission. the ments. Scrninar organized a panel In ordcr to achieve sustain Organización Latinoamericana de Energía Latin Amerícen En~rgy Organization •OLA.DE options, as well as the effective ma rkcts, as wel 1 as a rational nation and rhar, as a result of this incorporation of th is approach poi icy for tapping fossi 1 legal framework, it behooves the onro the agenda of rnunicipalnies resources. State to define policies for the or other decentralized enuties preservation and sustainable use Energy policics must also IMPORTANCE OF LEGISLA: of natural assets and to protec:t consider a social poi icy for the TION ANO REGULATION IN the environment. benefit oí the neediest groups of THE PROMOTION OF EFFl the population, ihe intelligcnt use CIENT USE OF ENERGY The efíicient use of energy oí incentives and disincentives, should be unclerstoocl as the right bascd 011 opportunity pricing The efficienl use o( energv is a oí users to be i nforrned about processes to facil itate the access right ancl an obligation of both how to meet their energy needs to different technological society and the State since the and use goods rnanufactured options. majority of the constitutional with techniques that enable thern provisions of tho countries of to use cncrgv rationallv, Furthcrmore, it is indispensable Latin America and the Caribbean to establ ish a poi icy for the have dctermincd rhat both In addition to rcceiving promotion oí tech nologles and rencwablc and nonrencwab!e information for thc bcttcr use of the creation of encrgy sorvicc natural rcsourccs are asscts of tho cncrgv, thc uscr shou Id also be 9 Organización Latinoamericana de Energía inforrncd about how iho supplicr tions, srandards, instruments, provides its service so that thc and programs in this arca, with supplicr's inefficiencies are not its wealth of experiences and tr.insferred to the customer and with cxcoptional [uture chal how thcsc inefficienc:ies can lenges. can serve as a reference aífr~cl thc pric0 and (]uality oí the for the countries of Latin 1\111eri· <;c.'rvicC' iha: is providod. ra and thc Caribbcan and inclu- sion in thoir own lcgislation. MANAGEMENT OF EFFICIENT F 11 ropo r0cog11i'0s 1 h r n rC'd I{> USE OF ENERGY AND ENERGY rcconcile the objcctivcs oí eco EFFICIENCY MARKET IN nornic growih. social develop EUROPE 111e11t, and envirunmcnta 1 pro rocrion. Various [urope<111 1 he dficiC'nl 11~0 oí oncrgv and coumrios havo takon lcading t'ncrgy í'Ííiricncy markots ;)rr. roles in rho issue of onvironment includccl in tho hroad (ramo a nd susta i nahlc dovolopmenr. work of poi icies for thc E'íficic111 More roccnt ly, rhc r:11rop0,)n uso oí (•1)C'fg)' of 1 ho t.uropoan Union and its mornbcr rountries Union and its 111t·111bC'r coun havo madc commitmcnts to 11 ie~. rhc set of laws, regu J¡¡. ach ieve important nxluctions in thoir grcenhouse gas emisslons. Tho rouotrics of tlw El;ropcan U 11 ion .irc THE IDB PROCRAM SUPPORT· ING SUSTAINABL( MARKETS FOR SUSTAINABLE ENERGY 111 its scarch íor solutions inspirecl by the relative success obraincd in the eighties frorn promoting the efficienl use of encrgy and rcnowables. tl)l) siarted a program aimcd al designing and testing innovativc modols íor susta inahle en erg y a p pro ved io r thc n ow competitive energy markets, 1 he 1'1ogr,1m Susíainable MJrkels for Sustainable Energy (SMSE) srrives to find cooocrauon schernes between donors. IDB, and 10 Organización Latinoamericana de Energía governments oí the countries, to region. similar to what is being companies, ancl 1hc íunding identify and resolve obstacles to done in Brazil. sources. the developrnent oí markets Ior sustainablc energy in the regíon. Likewise. the development oí Onc type of organization being The Bank is looking for a effic:ient and clcan urban created to J)rn111ote encr"v º' dvnarnic longterm caralvzcr rhat rransporration has been efficiency is thc cnergy service would tackle i nstltutiona 1, consídercd, to do this, company (ESCO); some of these regularorv, inforrnativc, crcdit comprehensive ancl innovarive co111panies, in acldition to access, and business resourco solutions are being proposcd to promoting energy eíficic~ncy, are problerns that hamper the meei thc nccds of the entire involved in providing a íull range oí transportar ion uscrs, range oí energy services. dovelopment of these markets. \ whilc proscrvi ng thc quality of Di lfcrcnt oxpcrlences bei ng the urban environment. Al Thc develoµrnent oí ESCOs in developed in key marker nichos. present, a model d ispl 11 Organización Latinoamericana de Energía 12 Organización Latinoamericana de Energía to reduce payrnonrs for their use GEOTHERMAL ENERGY IN or mlxed cnrcrprisns. These of electricity. COMPETITIVE 1\.\ARKETS OF mcchanisms should provide LATIN AMERIC:A ANO THE clcer. transparcut rulos Ior Likewise, it is cvidont rhat there CARllH!EAN i IWC'SlO rs. is a need for a sorvice infrastructu re such as cncrgy Ceotherrual cnergv is a resourcc u shou Id also be undcrscored scrvice cornpanics iESC:Os). in ihat has i1 great dcal of poiential that gcothormal energv addition 10 the active in Latí n Ame rica and thc dovclopment and opcr.uing participation oí olcctric power Caribbean. Ncvorthcless. recent costs havo been declini ng, rcform and privatiz ation u!ilities and thc availahilirv of rnaking gcot herma! en erg y processes taking place in the efíicient applianccs on the inc.reasi ngl y compet it ive and majoritv oí the rcgion, along market. arousing the intercst oí invcstors with thc risk inherent to the in participating in the diucrcnt lt is ernphasized that energy different phascs oí geotherma 1 stages oí geothcrmal energy saving is technically Icasible and cncrgy production. cou Id developmcnr. To do th is, at profitable for proiects and that impecle thc use of this valuablo present. thcro are options on the it is ncccssary to develop energy en erg y sou reo. To avo id th is, savings disscmination programs, merhanisms havo to be found to basis of which risk is taken as well as promete Organización Latinoamericana de Energía RURAL ENERGY SERVICE Rcpubl ic also described its technical, ec:onomic, financia!, SUPPL Y IN BRAZIL experience in devcloping rural and environmental arcas. clecrriñcation using photovoltaic Another sustainablc cncrgy energy. At present, it has 5,000 Among the relevant cconomic development cxperience des customers. 1 nvestment, op ~nd financia! aspects of this cribed at the Se111i11ar is the one erarion, and maintenancc oí the experiencc presented at lhe carried out in Braz i 1 by the svsterns are carried out Seminar, there is thc sizc of the Tcotonio Vilela roundation (FTV), cornmerciallv between the users projecl (22.4 MvV), which a NGO located in thc and SO LUZ. lt is expectcd 1 hat fati litatcd thc plncemenl of risk northeastern part oí thc country. this experience wi 11 be extended capital and fin 14 Organización Latinoamericana de Energía supply, energy sourccs, and fo onsure the competitivencss oí risks by sharing thcrn and rhcir market placemen: expectarions. renewables on a cou ntry's «osts bcrwocn the public and rhero market. must he well- privare sectors, Multilateral and bilateral institu- defincd cncrgy go,1ls and tions should rocus oúorts on policies. At proscru. susta inable market being thc catalyzers for rhc Thcre are still risks or barricrs to conditions Me hcing prometed dovclopment oí energy eííicien the devclopmont of renewables, íor the uso of rem~wables and cy and rcnewable resourcc pro and thoy shou Id be el i m inated cnergv eíficic~nl prograrns with grarns. 011 the hasis oí mechanisms thill three basic oilj We are proud... + to work in partnership with the world's largest oil companies, to assure a secura, steady supply of energy to our many clients around the globe -+ to be owner and operator of the largest refinery complex in the world • + to be the single largest exportar of crude oil and refined products to the United States + to be owner of the largest and lastestgrowing , 1( , , chain of gasoline stations in the United States ,, -+ to be the source for the largest proven reserves of hydrocarbons in the Western Hemisphere Weare Petróleos de Venezuela S.A. www.pdvsa.povcom .PDVSA 15 Organización Latinoamericana de Energía Energy Reform: l 16 Organización Latinoamericana de Energía equivalent to an annual of rho Domlnlcan Republ ic's rnte of 6.4%. Likewisc, while annual inflation en erg y sector a nd the amouruod to ¿ 1.7% important changes that are rluring 19H0-1989, ovor iaking place. it is necessary to (he last fiv<' years, omphasize previously the growth oí prices h.i~ not, on average, been performance of lh<' country's rho over two digits, economy, whir h over thc Iasr h igh leve! o( savings and íive vcars has sh i üed from a investrncnt, and in particular the lnvestmont performance has also situation oí scarcc cconomic stcady mercase of exports of becn importanr. As of 1995, íhe goods anrl serviccs. which growih and high levcls of sharo of gross domestic product botween 1995 and 1998 grew inilation to a situation of steadv airncd at invcsirnon¡ has been by more tha n 50'Y., in terms oí growth, cconomic stability, high ovor 28%, one oí the highest in U .5. dollars oí 1990. savings and investment, and Lali 11 América. externa! solvency. Morcover, the Doruinican Thc buoyancy of the Dominican Republ ic has been excmplary In the eighlics, the growth of the cconomy over the tast ícw years with rcspect to the pavmem of its Dominican cconorny, on has been based on the íoreign debt. While in 1990 this average, cmounted to 3.6% per macroeconornic stability clebt accounted ior 83% of GDP, vear, whereas between 199.1 and achieved rhanks to carefu l by 1998 this ind icaror had 1998, economic growth was management of publ ic íinance, dcclined 10 2·1.6'X,. Between Organización Latinoamericana de Energía 1993 and 1998, Dorninican sector had reached such a days alter 1-turricane Georges hit foreign debt dropped by about rnagnitude that the Srate was the countrv in September 1998. US$1.1 bill ion. unable to assume the burdcn, and this triggcred a crisis that lec! Regarding the electric power TOWARD THE TRANSFOR· to outages and fuel shortages. subsector, it shou Id be MATION OF THE DOMINICAN emphasized that the Dominican ENERGY SECTOR Fortunately, rhe economic crisis Republic is involved in a rapid of 1990 lecl to a series of process of economic mocl- VVhat has bcen the driving force drarnatic decisions in the a rea of ernization and urban ization, behind thc transforrnation of the oil and gas. Although all the which requires increasingly energy sector in the Dominican necessa ry reíorms el i el not ta kc higher consumption oí elec- Republic? place, prices were adjusted so tricity. l t is not possible ro that costs cou Id be covered and promete rhe development of Thorc are basicallv two elemcnts a proíit margin could be securcd telecommunications, tourism, in volved here: irnprovernent of the 1 iving standards of the popularion and competitivoncss of the countrv's pro- duction socrors. In tho case of thc Dominicnn Rcpublic, which is a nct i m port er oí energv, capírnl goods, and tochnol ogy, to rnanage the energv crisis of the seventics and eight- Doctor Leonel Femández, Preside11t of the Oominican Republic: "Ouring the sevenlies and early elght1es, llle e11ergy situation of countries such as the Oominican Republic was especial/y difficult duelo í11creasi11gly higher ies rcsources necdod prices. But we vrere tucky to have a11 organization like OLADE promoting cooperation between our countries for other scctors had to overcome the harslmess ol those limes" (address at the openi11g of the XXIX Meeting of Ministers of OLADE to be rransferred to in November 1998). the energv sector and a considerable publ ic debt to invest into development free trade zones ancl other was i ncurrcd. Ali of this debt actlons. Even when sector industrial activities without high- was aimed at (unding subsidies reform rernai ned pendí ng, qt1al ity and aclequate electric and coveri ng up i nefficiencies except íor specific rransitorv power supply. But it has turned that underrnined the future. cond itions. Dornlnican socicty out that the more energy is began to enjoy growing fuel placed on the interconnected Alreacly in 1990 subsidies to supply security, which was system to meet national fuels and the electric power possible to ensure even the first development neecls, the more 18 Organización Latinoamericana de Energía Latin i\n1etlc:iJo Eoergy Org<>n)zatlon • OLADE resources are los! by the state societv's rnost fundamental ELECTRIC POWER SUBSECTOR power utility. Likewise, the more difficulrics, a group of state MODERNIZATION LAW support is requirecl by the state enterprises rhat should have power utility to cover ils dcñcit, generated cnormous profits for Converting thc clectric power the harcler it is for rhc State to thoir owners have becorne a system into il fundamental pillar provicle Ior the i nvestments that bottornless pit that, in 1990, of the new clevelopment strategy MC nceded to cxpand the system absorbed 1 5% of the national is a challenge that the to meet growing demnnd. budget. ·1 here is no prospect Dorn inican Rcrublic has taken up with determin 19 Organización Latinoamericana de Energía that is capable uf rneeti ng lines. The hvdropowcr gen- of priv;ite-sector capilal by sociciv's growing energy eration utility will be means of capitaliz;ition, since requ i remen Is al cconorn ical ly adrninisrcring tbo contracts that Lhcsc lttilitics will be obligccl lo raüooal prices. havo been drawn up with add 100 MVV of eííective indcpcndenr powcr producors to capacily per year to the country's As part of the new scherne, íhe preven! power lrom being clcctric powcr gricl. State i~ withdrawing írorn ns suppl ied to the users at J business (unction ancl is distortcd cost. starting lo adcl ition, the qual ity and 10 plily thc role o( caralvzcr and reliahil ily of thc scrvice will not supervisor oí an cconornic In addirion, in order to mean any additio11al outlays for Fl0ctrir Powor l.aw has hccn support 1 ho rcgulatorv schemc the <.:urrenl wriíf will re111,1i11ed passcd by Congrcss, 1 he thfll was cstablishcd by thc unchJngcd for the íir~l íour ycar; Oo111inic~111 Govcrnmcnt is using currcru legisl,~tion with agrco- nnd provirlcs for thc grilrlu;i 1 rho cu rrent lc•gislation to mcnis subscribed bctwcen thc élppl ication oí ,1 t<'chniccil tariff, e~1,1blbh a regul.uorv (ramowork Dom in ican l:lectric Power thL1s rcclucinr, its i111p,1c1 on thc lhal is provided for in this Corporation, which is thc statc sectors with tlw lowesl n>n lcgislill ion. uti 1 ity that is the sol e owner of su m pi ion o( 01 cct ri c i ty ;i nrl publ ic power generation and mitig,lling the r0ductions in thc In viow oí this new transforming distriburion scrvicc, and the new sc•ctors with thc high<)st clt·ctric:i1y vision oí the Oomiuican clcctric uti líücs stcmming (rom thc CDE con su mpl ion. power sector, what will rema in in that will be injcctcd with both the hands oí thc Sti'.ltcl prívaro-scctor nipit;_il ;ind Thus, 1 h0 dcv0lopmc'nl ilnci According lo the State Enterprise priv 20 Organización Latinoamericana de Energía Latín American Energ!J 01·gani:i:.'.llic)n • 01.AOE OJL SUBSECTOR: A LONG- holder of 50% oí t he shares of At present, the reíi nerv uses STANOING COOPERATION tho Dominican Oil Refinery abour 90% of its reiining BETWEEN STATE ANO THE (REFIDOMSt\), which is capacity, which is equivalen! to PRIVATE SECTOR operatcd by Shell. ,¡ 9 ,400 barreis por dav, which indicares that to rnainrain the Thc Dominican Rr~public, as a Oil consumption íor industrial growth indicators for rhn ner oi 1 i mporter, has wilnesscd use incroasod by 6.1 % from consurnprion oí oi 1 products, rhe stcadv i ncrease in '1996 to 1997 í.ikcwise. the sale stcps will have lo be taken to consumpl ion of th is en erg y oí various rvpes of gasoline rose enlarge this c:apacity and rncet product ovcr the last few yeilrs, by 6.3'Yo during ihc same period. clomestic dernand. as a result or thc country's growth in i ndustry, tourism. and 1\ccording to dota published by The courury's authorit ics are trado. REFI DOMSt\, the consumptíon working on this. Their objectivc of oil-bascd fuels has increasod is to meet rlemand i 11 terms of Notcworthv in this subsector is steadilv ovcr tho last few years: quaruirv and quality, as an the agrccment in forco since whereas in ·1995 consumpt ion clemcnt supporti ng the socio- 1969 bctwccn thc Do111i11i<:an arnountcd to '16,998,300 barreis, cconomíc dovclopmont of the Covcrnmcnt and Shel 1 oi 1 in '1997 this figure had grown 10 Dominican l~cpuhlic. Q; companv, wheroby oach 0110 is 17,lll 0,500 barrels, The Technical Secretary ot the Off ce of lhe Presideni of !he Oominican Republic, Mr. Juan Temístocles Monlás, has been promoling transformalon of his counuys electric power sector in order to improve lhe living oonditions of the populalion and btiild up lhe competitiveness of Dominican produclion sectors 21 Organización Latinoamericana de Energía Se minar Modernization of the Electric Power Subsector in Latin enea• and the Organización Latinoamericana de Energía Latín American Energy Organizanon • OLADE s part of Enerlac '98, a US$70 billion if electric power Seminar on Moder- transmission and distribution are A nization of the Electric included. Power Subsector in Latin America and the Caribbean was Analyses carried out by OLADE held on November 16-18, 1998, have determined that the types in order to analyze the evolution of stations that have been and experience accumulated in considered in electric power those countries of the region that programs and forecasting have have carried out, or are in the been varied and depend on the process of undertaking, structural technology available, the degree reforms in the electric power of private-sector participation, subsector. and the resources and reserves of primary energy sources in each The Seminar was aimed at pre- country. Thus, it can observed senting an overview of the cur- that expansion of power rent regulatory situation, generation could be comprised addressing issues of competi- as follows: 14,758 MW hydro, tion, subregional electric power 1,309 MW nuclear energy, 344 integration, regulatory Irarne- MW geothermal energy, 74 MW work for rural electrification, wind energy, and the rest and the evolution of average convcntional thermoelec:tric electridty prices, energy, rnost of which with cornbined cvcles, using natural The principal issues that were gas, fuel oil, or diésel as tacklcd involve various aspects feedstock. of the sectors modernization proccsses, as summarized Thore is a wide variety of below: indicative expansion plans, which usually depend on the According to thc forecasting economic and energy conditions conducted by the region's of each country. Nevertheless, it countries, as well as estimates must emphasized that the short- made by OLADE, the peak and medium-term trend is demand of the Latin America toward the wider use of and Caribbean countries as a therrnoelectric facilities for whole will increase by more power generation, not only than 7,000 MW per year over because of the substantial the next four years. To meet this penetration of natural gas in increase in electric power power generation owing to the demand, production capacity high efficiency it displays in will have to expand by more energy transformation, relatively than 35,000 MW during the low fuel prices, and lesser period 1999-2002, and this environmental impacts, but also would require a total investment the growi ng participation of the of about US$35 billion in just private sector in therrnoelectric power generation. This figure projects, which require lower could amount to more than investment levels, shorter lead 23 Organización Latinoamericana de Energía limes ,111d startup periods and participation docs not rcspond to for lhe developrnenL of new ensure capital recovcrv in a real libcratizanon of the energy markcts cmcrging as a shorter periocls oí time electric powcr subscctor: rathcr result oí the reforms, mee! ing compared lo hydropower it could be seen as a "r ostfy thcir credit neecls by means of projccts. Iinanci ng" of thc prívate sector the instruments ancl units that are Ior electric power production most suitcd to thc r.h;ir;ic.tcristics [xe<~pt for (hile, Argentina, activiues. of each rnarket. Poru. Bolivia, and Colombia, thc~ legal and institutional frame Thc coorurics or thc rogion. with 11 is Jbo bJsed on d global works supporti ng thc moder- thc most experience, havo secn approach Lo both cncrgy supply nization and 1 iber ..1 1 iz.uion thc ovcrall efticicncv oi the ancl cll•mand problcm~. This process in electric power electric powcr sector i mprove: leacls to recommending a rnuhi- activilies in rhc rnajoritv oí the lower loss lovcls, dccl in i ng discipl i nary ancl i nter-clt•part- countrics of t.atin Amcrica and marginal production costs, mental action to expcriment the Caribbca 11 havo bccn highor business ind icaiors, ele. witli comprchcnsivc solulions 10 inslill lcd ovcr thc l¿¡sl four vears. Ncvcrthc•lcs~, groaror attcntion 1·he complex prolilern oí urban Cou ntries such as Venezuela, must he (ocused on sharing thcsc transportaLion in thc rcgion's Paraguay, tbe l)om in ican benef ts with thc custornors of c.itic~s. Republic. 24 Organización Latinoamericana de Energía contributions, cspccially govern- the evolution of compan ies Alihough appareutly simple and ment subsidies or outlays. uncler conduions cnsuring trivial, this is a key elcmcnt so slé1bility of the rules of the rhar distriburors or iraders of 1 he financial sustainabilitv oí thc ga m e a nd mini mu rn legal elecrricirv can sustain them- electric power subsecror rcquires securlty. selvcs cconom icall)' and can two fundamental clcmcuts: fin anee 1 hcir opcrations and investments, whi!e rulíi lling their I'ho first factor is closelv 1 inkecl • Restoratío» and permancncc commitments lo pav carriers and to t he generation of income gcncraiors. which in rurn can oí thc financia! flows flows sternmi ng from thus ensuro rhc fi nancial produced by rhe secrors transactions in ihe different sustaiuahilirv of thcir own own economic activirv in 1 he stages oí the process, inclucling activirics. d ifferent scgmenrs oí thc transpon. The point of departure markei, lhill is, thc intornal oí this cha in is the end-user. who Thc gcncrarion oí Ilows of generation oí Iunds. in clcar uses rhe energy and pays for it intcrnal funds is indispensable lo and srablc rcgularorv with rcsources coming írom his gain access lo financia 1 markets íramcworks. own cconornic activitv, rhar is, and lurc risk c,1pi la l and thev are resourcos from outsido i ndebieduess to financc i nvcst- • Thc cxísrcnce oí a thc sector which enter the sector mcn Is, and rhis i~ vcrv closclv macrceccnomlc cnvi- in exchunge for electrícttv 1 inkcd ro 1 he cronornic structure ronmont th,11 would pernil¡ supply, oí tho olcorric powor markot and iho suuahlo opcration of the rcgulatory svstem, 1'11c sccond elemeut is exrernal 1() the sector and involvos rho cou ntry's genera 1 poi itical, At AES Corporstion, we cconom i e, a nd l<"gil 1 cond i tions, produce clean, safe, Th is cstn hl ishC"s 1 ho cou n try' s risk and reliable energy, rnling and thcrefcrc thc difficuliv serving the world and cost of gaininr, access 10 with social conscience capital 111Mkcb. In tu r11, it i~ closelv l ied to the secior's regulatory frnmcwork, the mnrk<'t si ructlirc <111d the opcr;ition oí utilitics because it is (1 iííicult to have ;rn orderly and díicic11t electric power sector in an economy with severe ddicicncies, poli ti cal instabi lit y, and ()Verall leg Obviously, to cnsure the fi11anciwl sustain 25 Organización Latinoamericana de Energía must esrablish Natural gas. Electricity. Endless possibilities'." 26 Organización Latinoamericana de Energía L"tin A1n~rir. • lt usual ly to On par with the now the subrcgion's encrgy inte- improverncnts in company technologíes, new plavors have gration proccss. r\$ part of lhe managernent. with the appeared, Jooki ng íor their clectric power i ntegr;i1 ion resulting improvernenrs in natural role in the clectrification process, the countries lhal cll'e oper.uing eíficiency, in the process. 1\t !he sarne time, the members oí i'v1ERCOSUR have phase beforc the sale, which role that both publ ic and privare recenlly forma lly cnterecl into a generares favorable fiscal electric: power uriliries must Memorandu111 oi l Jndcrstancling ímpects over the short term. pcrform in this new phase rnusr 011 Elec:tric Powcr Exchangcs ancl be studied. As íor the Srate, it is Electric Power lnlegraLion in • 11 has positivo repcrcussions obliged lo redefine the role it has MEl~COSUR (199/l) 011 savings, si neo the to pin)' in thC' process oí ;ipplying rcdvction of subsidies that is the new rochnologios to provide lt is po;sible lh 27 Organización Latinoamericana de Energía regional operation and open environment, with efficient is in the rnidst oí restructuring power expansión. privare-sector power utilities and adequate and refonning its electric invesiors could find greater regulatory (ramcworks. power subsector. opportunitics that wou Id lead to econornic benefits for the • As íor renewable energy The Seminar on Modernization population. Thus, it would be sources and rural electrifica- oí the Electric Powcr Subscctor necessary to clirninate the tion. in addition to the pro- oí Latín America and the technical, comrncrcial. legal, blem of íinancing, there is a Caribbean is a íollow-up to rhe etc. barriers so ihat. ovcr the lack oí trained human Seminar on Evolution, Situarion, mrdi um and long term, resources and ihere is a nced and Perspectives of the Electric subregional and regional electric for a technical standardiza Power Sector in the Countrics of powcr corridors could be tion framework to ensure the l.atin Amcrica and tho Caribbean created. quality oi equipment and hcld in 1991 in Cocoyoc, installations. Mcxico. A third installment oí CONCLUSIONS this serninar would depend, lo a • Thc ñsca 1 aspects oí the certain cxtcnt, on whethcr the Arnong rhe conclusions of the subjcrt wcrc dcalt with by countries ihat havo undertaken scrninar, the following MC ECLAC, which indicated that regulatory and instirurional noteworthy: privatization is not an reíorrns in rhe electric power appropriate way to tackle suhsector over the last two or • Ihe tnrcrAmortcan Dcvcl- public account imbalances. three years, have had tho opment Bank <111cl the VVorld l'rivatization can load 10 opportunity oí concluding their B,111k continué to promoro improvernents in utility restrurturing prccess, selling their policies supporting reíorm rnanagement prior to the sale corrcsponding shares, and and modornb ation J)rOC<'S~ and can have posruve operatlng with a prívatesector eS almud ,11 (osteríng the repercussions on savings administration during a period uf dovclopmcnt of regional since the reduction of time that would enablc to d<'tcct energy scctors. subsldies thar is part of the and share the SUC(..ess that has process will consolidate the been achicvcd, ¡is wcl 1 ns • The Iinancial sustainabllity oi financia! sustainability of the discuver lhe tleficiencics that the electric powor subsortor corresponding seciors. require greater attention by thr. is closely related to the subscctor's principal playl:!rs.Q; financia! flows produced by • The country hosting E11erl11c thc scciors own economic '98, the Dormniran Rcpublic, activitics and the existence of showod special interest in the ,1 suitable macroeconomic Seminar, basirally because it 28 Organización Latinoamericana de Energía Organización Latinoamericana de Energía ARGENTINA: Sale of YPF shares to Repsol of Spain In an opcration involving more than US52 billion. the Government of Argentina will be selling to the Spanish company Repsol ·14.99'Y<• oí its shares oí thc oil companv YPF, the countrv's largest company. Acrording to Argentine governmeru sources, the govcmmcnt will retain a 5.4'Yo share in YPI but will be selling "at sorne Lime in ·1999" about 5.3% oí its shares and will kcop its "golden share" which entirles ir lo veto decisions to merg<~ or hiel for majoruv sharehokling. CUll/\: Efficiency enhancement: challcnge of the eleclric power sector The Minisler oí 13,tsic lndustrv, Marcos Portal, during lho annual rcport oí lh<' FIC'rlri<: Powor lJnion (LJNI:), cmphasizcd that tho sector has thc h\18C challcngc of restoring sorvicc rcliability and qualitv by rnoderniz ing ils thennoelecmc stauous, implomcnting an energv-savlng program, and (h,;nging the consumption structure hy the ycar 2001. In 1998, the UNI: managed LO a<..h ievc URUGUAY: Transforming voltage from 220 to 400 volts The low-voltagc clectric power network oí Uruguay will be transforrned from 220 lo 400 volts, in line with international standards. To do this. ovcr a 20-year period. USS400 million will be ínvcsted in Montevideo alooc. according to ofíicial sources Irom the power ulilily Electric Powcr Pl<111ts and Transrnissiou (UTE). This conversión will reduce the cost of industrial inputs and build up the capacity or thc national electric power svstem, but wi 11 not imply anv changcs in the LIS<' oí household appliances. This plan is aimerl ar putling rho country on par with thc rest of the world in tcrms o( clectric power voltage and wi IJ enable U rE lo oífer higher- quality service. 30 Organización Latinoamericana de Energía 1~,1- MEXICO-COSTA RICA: Energy cooperation agrcement Tho Prcsidnnr of Mf!xico, Ernesto Zedillo, and the Presidcnr of Costa Rica, Miguel Angel Rodrigue?., during ;¡ recen! official visir b11 rhc Mcxiciln Hcad or Sratc. suhscribcd ninc coopcrauon agrocmcnts in San losé. One of the most important agrccmonts is rhe encrgv coopcration agrecment that previdos for a preferential partnership between the two countries and involves ECUADOR: Privatization of electric power utilities VVith thc offic:ial ratiíicatlon oí the staiutes and rhe subscriprion of the puhl ic documenis for rhc now powor goncratlon nnd transmission util ity companios, rhc hnsic srops to siart clcrlric. powcr sector privartznrion havo boon rnkcn. Regarding thts, the 1V\inis1cr oí Fnr-rgy and Min0s oí Fn111dor, Patriclo Ribadcn0iri'i, r01)ort0d that a bi 11 airned at amcnding thc law is bcing clraftcd in ordcr 10 providc grc ~ EL SALVADOR: Opening up to prívate-sector investment The General Superintendence of Electricity and Telecornmunications (SIGET) announced thill authorizaticn was givcn ror two ncw powcr ulilitics 10 gcncratc clcctric powcr, rhus bringing to an encl the rnonopolv held by thc 1 cmpa Rivcr Electric Power Cornrnission (CEU. The new utilitv cornpanies are the U.S. companv Pacific Powcr <111cl thc Canadian company Power and Energv. which will be starting their activities immcdiatelv. 31 Organización Latinoamericana de Energía Organización Latinoamericana de Energía OIL PROVENV JC~LO~ESE ~VE S 1'.0''Bol. 1997 HU) ·~es 1~~1 l~s-5 1J9' IU91 GRO·\•fl..¡ REG!ONS Ht\fl >· LAllN-A°llEfi. 'NESTI:RN El)ROf'F )5l 21 ¡ 14 5 16 ~ lll:, [(I ¿' 15 % ,\ 1.-.¡ h( E•'•S1El{N EIJROPE \lnd :1s.1 (l;).1 6(+!} 5!!a es- 665 €5·1 .02 ~;, r.11 r..n1 f f :.sr JiY.13 4~19 ii61 I> l)!,16 6Hi J 67ti9 o 1 ~;, AFRICA ss- 5(;) 1'/:'.t. :'<:'i ('llS 1(11) J. ' ~·., ¡ AS •'•~O AUSTAAl,.ASIA ., , 11 '1 ·Ml ·1~ ~ l.?·1 4í3 ru> ~;; WQRLC 6~5·1 1~3i ·o~.!.2 'An 1r:.:s • 1!'.!i1 ~ .; r, ~;. ) S1;1J11.:~-a: L WORI o RFFINING C1\PAC.ITY '.10 •Bol'doy) 1997 197E •986 ·900 '997 GF\0';\1~H Rt-to:JNS Rl\fF ~ :>. llN A \1LRICA S. CMUllOCl•.H !1:>50 !I~:¡; ¡;4~J 6404 6SH 64 ';, ,, :•,1\1 0·1,," °"~'5 "!\~"·" "~ "· \OR,.H/,f,i~nlCA 11151'5 1?G45 17f;O:> 17\:(.0 u?io 11·!7'i 1 ~) % ' .,_.iCST?RN EUROí'E 2,·1ti{) 146UO 11l3li 16:>10 1tH25 1t650 1 4 •;¡ ',.~0 2~~ i.ar,¡ ie~o ?é3Q .::¡-: s·; 'ª"' ······ ...... ;\$11,t•\ JAVSTqAU\Slf.. 11135 !l5)5 ·3e1s 16755 ·5535 1eQ45 L5 7 s·, \'lORIO 719Y.l 7'9E,O ;4e20 i!>15~ i't.•li.-1 i'?8Z4 •I s '!1 ',, sovces t.ann A-reo:ao $id lheC..'u:ib(:Q'l CL•'·O~-::c. ::rNJh·f°Cl>'IOfll~ lnfo1m,1ho'lSyste n ($11:€.) 8P $1.;tl!Sbrol Rev ew of ';\~rid Ener;y t99i.! TOTAL: 77824 (10l6bl,'rlay) 33 Organización Latinoamericana de Energía NATURAL GAS PROVEN WORLD RESERVES 11o•rr3J 1997 REGIONS 1976 1981$ 1~· 1995 i936 19S7 GRO'NTH 1 RA1E U.T•'l.VAE~lt.J.4 C/>J'll!ISt:NI LAllN AMER GA& CARl88EJ\N 2228 6193 7122 760! 7869 7005 .Q.8 % J.SL\&/tUSIR.\L•"-\1'• $''> '.'lfSlH·itll.Jl{:.:P!: NORTH AMERICA 7969 8246 7300 6500 6610 6550 ·0.9 % WESTERN EUROPE 5091 651).1 5100 S5CO 5420 5570 28 % EASTERN EURCºS (lrc CISI 23673 44339 50000 56000 57200 65710 14.7 % MIOOLE EAST 15228 26202 37400 !52CO 45790 48880 6.7 % AFRICA 5864 5703 saco %00 9870 6.1 % ,.'IOCl..fe- sr ~º' ui. ASIAAND AUSTRAL ASIA 3158 6473 8400 9;()0 9110 9080 --0 .3 % \f;'ORLO 63211 103660 124122 139704 141379 153~6~ 8.5 % seerces Labn Ame1ican and the Ca1ibbean~ OlAOE·EC. Ef'l COAL PROVEN WORLD RESl:RVl:.S ]10•Tons) 1997 - IJl,11\A M, I( Ali, Cf,ftrll'l.Ml . . ,., '' ~ ~ JOOOOO . -.-- ¡.¡;•I( ojol>'l•ITl.A ...... >- .... ._ >- '- '--- '- - /.'1.\l>Nl)•\IJ•. " ,_ V}'i, ... - - >- '- - - '--- - '------,_ ~ .... >- '--- '--- ,l t.l~(A - - - - c.., rJICOl.f 1 i\St t, !1111100 >- ,_ • ., -- -,. - • ~ "f e-! ~~ J Lt ~~ I ~ 1993 1904 1995 - 1996 1097 Sour~· Lat !'lAmerica and thc Gaootxian. OLAOE·EC. Energ~··Econoirt lnfoimation System {SIEE) Yoars 1990· 1997. BP Statisbcal Review of Wo1ld €ne 34 Organización Latinoamericana de Energía ELECTRICITY WORLD HYDROPOWER POTENTIAL 1997 1997 ' .\SIA !Al.Sfl\t,...\SI>. ' ' ' t}l563 .AffllCA esusa 14TN.lU(tllCA$ CA,:tl8!1Uli MHl!X.EEA.$l "' "' f:,i.ST1;"1( EVAO=>E ~ "'"' \'•ESffR'( EtlllOPf ~ '""' ....ORTtU.WEf'l'GA ~,~...,, l lA"INA~llACI. ., ASO OOmllll,-N ¡ 1tJ! 1 TOTAl3212.S(GV..') WORLD INSTALLED CAPACITY BY TYPE OF PLANT 1997 (MWJ H'YOl'tO· Trft;J{MO· REGIONS GEO'rHFRMlll l'iUCLfAR TOTAi. POV•'CR Fl.PC_,,TFUC LATIN AMERICJ\& CAl~l98EAN 117284 ••• J-02& 207359 NOk 1 H AMt::HICA 160000 ll87001) 1700 11~()(10 &697CO \'>'CSTEA.N EUHOPE M·llXX> J28000 4()j)O 1:t3(1(10 &00000 EAS 1 ERN l:UKOPt::(ll)C I. CIS) ~O(l(JI) 309001) o 47000 436000 MIOOLtEAST &000 61000 o o 86000 A FRICA 21000 7COOO o 2000 93COC AS!AANOAUSTRA\.ASIA 138000 617000 2COO 59000 /14000 . WORl.O 008284 19UIOS2 1 8696 JS002S J005059 - Scu1ce1: LalinAA\erlca and lhe Ca11b:itan: OLADE·EC, Ene~)··E00r1ornic lnfcrmabcn Syslem \SIEE) OLAOE etlimates b&seó en lntemaliona! E11ery~ Annu HUCLt:AR NUCLEAR 1-\CYOOOPOWER 12% 1% 22% GEOlHER\iAL GEOTHERIML (J'),{, 0% íHl:RMOE.Ll!ClH!C 41% HYOROP0•'1Ell 58% 1'HERMOELEC1RIC 66% 35 Organización Latinoamericana de Energía •••••••••••••••••••••••••••••••••••• • • • Bolivia-Brazil Gas Pipeline • New Symbol of Energy lntegration • • After 17 months of construction, with an by US$100 million during the first year of its • investment of US$2,015 million, the gas line operation and that it would foster even • between Bolivia and Brazil, one of the most further the integration of markets and the • important energy projects for Latin America development .of new opportunities. • • and the Caribbean, was inaugurated by the • • President of Bolivia, General Hugo Banzer, "This project is a decisive step in the • and the President of Brazil, Dr. Fernando progressive consolidation of a new energy • Henrique Cardoso. policy in South America and regional • integration," commented the Brazilian Head • The gas line will carry clean and ol State in his address. • economical energy, wlth high productivity, • from Santa Cruz, Bolivia to the currently As for Generar Hugo Banzer, the Presiden! • expanding industrial zones of Sao Paulo, of Bolivia, he indicated that the US$7 billion • Brazil. that his oountry will be taking during the 20 • years of the initial contrae! will help to • The first shipment of gas using this project. generate jobs, develop economic and • • which has a total length of 3, 150 kilometers social infrastructure alongside the gas line, : • ancl whose total weight in pipelines expand the transport network, directly • • amounts to 500,000 tons, involves 3.7 attract private-sector investment and. of : • mi Ilion cubic feet of gas per day in April course, effectively integrate Bolivia with • • 1999. Afterwards, it is expected that 6 Brazil, which will help to consolidate the : • million cubic feet per day will be sent, thus active involvement of Bolivia in Mercosur. • • meeting 10% of Brazü's energy demand • • • and supplying the needs of at lcast 470 "Today, with the termination of construction • • metal, chemical, petrochernical, and othsr of the gas line. Bolivia's status as the : • industries. energy nucleus of the Southern Cone is • • being reasserted, and the country is : • Al the inaugural cersmony, held in the deliberately offering to all countries of the • • border town of Carmen de la Frontera, the region to be the focus of their energy • • President of Brazil, Dr. Fernando Henrique integration," stated General Banzer. He • • Cardoso, said the gas pipeline was a also said that the Southern Cone is the • • symbol and indicated that, among the home to the reqion's most industrialized • • expectations for integration and trade • areas and that, with this gas pipeline, we • • between Brazil and Bolivia, the benefits for are also inaugurating a sustainable • • the two economies, as well as the positive development approach that will achieve • • • multiplier effect. would be immediale. ecological balance and generate ctean and • • low-cost energy in lands that are apt for • : He assured that, as a result of the start-up both farming and tourism. • • of the gas line, trade would initially increase • • • • • •• • •••••••••••••••••••••••••••••••••••••••••••••••••••• • 36 Organización Latinoamericana de Energía