Ready, set, stop: gas sales to a ravenous North American market should have saved South American suppliers. Yet they might be taking a backseat to Indonesia and Trinidad & Tobago.

Indigenous groups in Bolivia not only ousted Bolivian President Gonzalo Sanchez de Lozada last year. They also raised doubts about a multi-billion dollar project to export natural gas from Bolivia to gas-hungry consumers and industry in the United States and Mexico, setting off a race from Indonesia to Baja California to be the first to meet surging North American demand.

Bolivia's foot-dragging on the issue, meanwhile, along with the political and legislative hurdles for investors in gas-rich countries such as Argentina and Venezuela, fuel speculation whether any South American country will get its house in order in time to win that hugely lucrative global race.

After rising 21% from 1990 through 2002, U.S. demand for natural gas is expected to jump another 18% by 2010, rising to 24.73 quadrillion British thermal units annually, according to the U.S. Energy Information Administration. "We in the U.S. were smug," says John Lichtblau, chairman of the U.S. non-profit Petroleum Industry Research Foundation. "We had all the natural gas we needed between us and Canada, not like oil, where we imported 50% to 60%. But that won't be the case for much longer because our gas demand is rising and production is beginning to decline."

Harboring Latin America's second-largest amount of natural gas reserves at 55 trillion cubic feet, Bolivia would seem the Latin American supplier best positioned to serve the United States' future needs, especially considering U.S. distaste for the leftist rhetoric of Venezuelan President Hugo Chavez, the region's gas titan and a far closer supplier. Yet Bolivia has only served as a case study among Latin American countries on how to fail to get the most out of embarrassingly rich reserves.

Strangely, it wasn't selling gas to the United States that moved protesters to topple Sanchez de Lozada. Instead, nationalist sentiment was fed by a plan to move the gas in a liquid form through Bolivia's historical enemy Chile rather than Peru, even though shipping through Peruvian ports would cost more. Bolivian President Carlos Mesa has said he will hold a referendum on the issue, but economists speculate that a vote against Chile could prompt Pacific LNG, the energy consortium leading the Bolivian project, to pull out over the increased cost. Spain's Repsol YPF, British Gas and Pan-American Energy of the United States control Pacific LNG.

Waiting. Though a resolution doesn't seem imminent, Bolivians like Viktor de los Heros, president of Bolivia's National Chamber of Industries, remain optimistic that the nation will pull together to make the project work to serve the U.S. market. "The gas project will be approved when people come to believe it will improve life for the Bolivian people," says de los Heros. "Yet, we know there has to be a gas business in Bolivia."

Argentina is another of the Latin American suitors that planned to curry favor in the United States and Mexico. In particular, its western province Neuquen has been trying to lure the gas consortium from Bolivia. "We see ourselves as an alternative to the Bolivian project to export gas to Mexico," says Alfredo Esteves, minister of planning and management control of Neuquen. He notes that Argentina, with at least 27 trillion cubic feet in reserves, doesn't have political concerns with using Chilean ports. Further, since the country abandoned the peso's peg to the dollar, its gas is now almost/bur times cheaper than Bolivia's, at US$0.33 per million British thermal units, compared to $1.20 per million in Bolivia.

While Argentina and Bolivia had hoped to rely on selling to Brazil to boost gas revenues, the discovery of gas reserves in late 2003 off the coast of Sao Paulo has muddled the gas equation while possibly creating a new regional gas exporter--Brazil itself. Facing lackluster demand at home, Brazil's state oil giant Petrobras is now trying to renegotiate the volume and price terms of its long-term contract to import Bolivian gas, a difficult undertaking given Bolivia's need to have customers while the Pacific LNG project is stalled. With more gas on its hands than it now needs, analysts say, Petrobras may ultimately look to export out of the region entirely.

But it maybe in Peru's wake that Bolivia eventually will swim, since efforts to use the natural gas from the Camisea fields in the Peruvian Amazon are rapidly moving forward, according to Carlos del Solar, general manager of U.S. oil company Hunt Oil in Peru, which leads the Peru LNG consortium. In September, the consortium agreed with Tractebel LNG, a unit of Belgian utility holding Tractebel, to ship liquefied natural gas to Tractebel's proposed gas receiving terminal and regasification facility in Lazaro Cardenas, Mexico. He says the Peruvian consortium aims to send about 400 million cubic feet of gas per day to the Mexican market and another 200 million to the United States through Mexico. "Whoever gets them first has an advantage," says del Solar

The Camisea project has a leg up on Bohvia in terms of its proximity to the U.S. market, del Solar says. "Shipping costs are very high and have a big impact on the economics. If you can save a ship or two it will help your margins and help put your gas in the market at a very competitive price," he says.

Finish line. Latin American gas exporters may also find themselves eclipsed by non-regional suppliers with this first-mover advantage. Countries like Bolivia could be relegated to arriving in a second wave. Specifically, analysts note, Indonesia's 20-year deal with the oil and gas company Sempra Energy LNG, along with the U.K.'s BPMiGas and British Petroleum, will send 500 million cubic feet of gas per day from its Tangguh facility to a new terminal in Baja California, Mexico.

Mexico, too, is struggling to overcome its underachiever status in the natural gas field. With rising gas prices at home and a gas supply deficit estimated to reach approximately 1.9 billion cubic feet per day by 2010, Mexico has stepped up on its gas output targets. Jose Alberto, a director of the economic consulting firm LECG and former director general of Pemex Gas and Petrochemicals, says Mexico could double or triple its production, enabling it not only to be self-sufficient in gas but also, in time, become exporter to the United States. However, Mexican law prevents foreign firms from having a share in the gas produced for state-owned Pemex, which has hamstrung the industry; response to Pemex's bids to find gas partners remains tepid. Nevertheless, as Mexico now imports 900 million cubic feet of pricey gas per day, the country has begun to seriously address this issue, Alberro says.

Venezuela, meanwhile, sits on over half of Latin America's gas reserves--148 trillion cubic feet--and has Latin America's greatest potential. But it is only beginning an LNG export strategy, and Trinidad & Tobago beat it in the Caribbean dash to serve the U.S. market, according to Michael Economides, an oil expert at the University of Houston. Given the massive costs required to build the infrastructure to export gas, analysts argue, other Latin American countries may struggle to find a convincing business case. "Most likely those countries will have to accept a price lower than what Venezuela is charging or the U.S. will just buy from Venezuela," says Marc McCarthy, an oil analyst, for Latin America for Bear Stearns. "That's only if Venezuela gets their ducks in order."

Increasing regional trade could ease the pain. Argentina at press time began talks to import gas from Bolivia, which would help the two compensate for their shortfalls in gas production and revenue, respectively. Relative stability and geographic proximity can go a long way.

DANIEL A. JOELSON * SANTIAGO