Paraguay Pursues $1.5 Billion Gas Pipeline Linking Argentina and Brazil

(Reuters) — Paraguay is advancing talks with energy firms and high-ranking government officials from Argentina and Brazil over a potential $1.5 billion gas pipeline to connect the three countries, senior government officials for Paraguay and Brazil told Reuters.

The plan being drawn up by Paraguay, reported in detail for the first time, aims to compete with a rival Bolivian bid to repurpose existing pipelines to transport Argentine gas to Brazil. If either project is realized it would mark a major potential shift in regional energy flows.

"We want to sign a memorandum of understanding at a presidential level (for the pipeline) in June," Mauricio Bejarano, Paraguay's deputy mining and energy minister told Reuters. "There is a general support for the project."

As declining gas output in Bolivia forces Brazil to look for other suppliers, the potential option of gas coming from Argentina's booming Vaca Muerta shale region via the Paraguayan Chaco is gaining traction, said Rodrigo Maluff, Paraguay's vice minister of investment. It would involve an estimated investment of $1.2-$1.5 billion, partly from the private sector, he added.

Governments and companies from Argentina and Brazil have also engaged in talks with Bolivia since last year over what they think could be the fastest and cheapest option to transport gas from Vaca Muerta to the north of the region, which would involve reversing the flow of Bolivia's pipeline network.

In recent months, Paraguayan officials have courted investors in Sao Paulo, met with Brazil's energy minister in Asuncion and officials from Argentina. Tecpetrol, which controls some 15% of Argentina's shale gas output, was part of these latest talks, as was Buenos Aires-based Pluspetrol, Maluff said.

The companies did not respond to a request for comment.

The Paraguayans said the pipeline's initial daily capacity is projected at 15 million cubic meters in the first stage.

Alexandre Silveira, the Brazilian Mines and Energy Minister who traveled to Asuncion in April told Reuters that he was aware of Paraguay's intention and expressed support, but said further studies were needed.

"We agreed to set up another meeting with the private sector to better study the viability," Silveira said.

Plans shared with Reuters show the new pipeline would run 110 kilometers (68.35 miles) from Campos Duran in northern Argentina to the Paraguayan border, across another 530 km of arid, flat land in the Paraguayan Chaco to reach Brazil.

An additional 400 km of pipeline would connect Carmelo Peralta on the Paraguayan-Brazilian border to Matto Grosso do Sul and from there potentially join the existing Gasbol line to Sao Paulo, Brazil's biggest city.

The governments of Bolivia and Argentina did not respond to requests for comment.

Bolivia has for years been a key gas supplier to Brazil and Argentina, but its declining output and the potential growth of the Vaca Muerta shale region are poised to change the energy flow dynamic.

Silveira said that the two proposals were not mutually exclusive: "One does not exclude the other," he said. The Paraguay option would help Brazil supply energy to its Tres Lagoas fertilizer plant in Mato Grosso do Sul, he added.

Brazil has made clear that Argentine gas from Vaca Muerta - the world's second largest shale gas formation and fourth largest for shale oil - will be needed to balance supplies due to the decline in Bolivia's gas production.

"Brazil represents the demand," energy expert Victorio Oxilia, a professor at the National University of Asuncion said. "Without the Brazilian market nothing happens, so the position the country takes with a project is fundamental."

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