''Economic Brief: Venezuela's Pipeline Deals''

The recent gas pipeline agreement between Venezuela and Colombia is the latest step in an effort by Venezuelan President Hugo Chavez to better integrate South America. The pipeline deal was signed by Chavez and Colombian President Alvaro Uribe on November 24, 2005. The agreement puts onto paper the decision to construct a two-way gas pipeline between Colombia and Venezuela.

The pipeline agreement is the beginning of a larger project that will bring crude oil from Venezuela to the Pacific Ocean, where it will then be transported to Asia. It also comes after Chavez and Argentine President Nestor Kirchner discussed building a natural gas pipeline connecting the two countries. Both the Venezuelan and Argentine leader also expressed their optimism that the proposed pipeline will be part of a larger project involving Peru, Bolivia, Chile and Ecuador.

Venezuela's Recent Pipeline Deals

According to the Venezuelan-Colombian pipeline agreement, construction will begin in 2006, and the pipeline will cost more than US$230 million. Caracas will pay the entire cost of the pipeline, and will own and operate it. The pipeline will span 215 kilometers (134 miles) from Colombia's La Guajira peninsula to Venezuela's Paraguana Refinery Complex. Paraguana is one of the largest refineries in the world, and can process 940,000 barrels a day.

During the first seven years of service, the pipeline will move Colombian natural gas to the Paraguana Refinery Complex until Colombia's natural gas reserves are depleted. After that point is reached, the flow of the pipeline will be reversed and Venezuela will then feed gas to Colombia.

On November 21, in a separate deal, Chavez met with Argentine President Nestor Kirchner to discuss building a natural gas pipeline between Venezuela and Argentina. The proposed pipeline would connect the two countries by passing through Brazil, and is estimated to be around 6,000 kilometers in length and comes with a projected price of US$10 billion; the pipeline would be constructed by Petrosur.