Todd, Cameron M. (Pioneer Natural Resources (Argentina) S.A.)


THE SOUTHERN CONE GAS PHENOMENON THE SOUTHERN CONE GAS PHENOMENON A LATIN AMERICAN GROWTH ENGINE Cameron M. Todd, Pioneer Natural Resources (Argentina) S.A. Abstract. The 1990's introduced a decade of unparalleled change and growth in Latin America. Throughout the region, democratic and free market reforms brought massive change to governments, economies and industries, unleashing economic forces which stimulated demand for resources, energy and capital. Nowhere have these effects been greater than in the Southern Cone (the lower half of South America) where the phenomenon of the natural gas industry promises to be a continuing engine of growth during the next decade. This paper compares the outlook of the Southern Cone gas industry through the 1990's with the situation today and trends for the next decade. In addition to demonstrating growth in regional gas production, reserves and energy demand, the paper discusses the evident trend towards regional energy integration. It discusses expansion of regional infrastructure, alignment of trade and energy policies, downstream integration, cross border ventures and alliances, and movement toward a regional energy price. This energy growth has been fuelled by significant capital influx, in turn stimulating substantial economic development. The regional forces driving gas development in the Southern Cone continue to gain momentum. Although many technical, regulatory and economic hurdles must be overcome, it is expected that a swelling gas demand during the next decade will bring massive investment and development to the region. policies and opportunities are just beginning to


align and where the continent's largest energy market has the potential to bring about gas During the 1990's gas production growth unprecedented in Latin America. The accelerated rapidly in Latin America, and large decade of 2000 promises to be an exciting new reserves were brought on line, fed by an opportunity in Southern Cone gas for those ever-growing energy demand which exceeded prepared to master the challenges of even the fast-growing economies of the region. continental integration. This rapid growth of Southern Cone gas can be attributed to the unique convergence of several key factors: SOUTHERN CONE SUPPLY AND DEMAND ­ "THE 90'S" 1. Availability of large gas supplies. 2. Ready market capable of absorbing South America has long held a prominent increasing supplies. position in the world's energy supply, owing to 3. Large capital influx for major the immense resources of Venezuela on the production, infrastructure and northern part of the continent. Venezuela's downstream projects. reserves represent 80% of the continent's oil 4. Construction of critical infrastructure and 65% of the gas (1) to connect markets. . Unlike oil, however, where Venezuela is a world power, its gas 5. Alignment of government policies, reserves remain largely unexploited, as the fiscal and regul