Unasur.

The first South American Energy Summit on Isla Margarita ended on April 17, 2007, with agreements to create a regional energy council and to re-baptise a fledgling effort at continental integration, but without a final declaration. Hours after the departure of the first president, Argentina's Nestor Kirchner, diplomats were haggling over the biofuels portion of the statement, though accord was reached on rebranding the South American Community of Nations as Unasur and endowing it with a permanent secretariat based in Quito.

Host President Chavez was upbeat when he talked to reporters outside the hotel where the gathering took place, saying: "It has been a perfect summit, everyone left very content". Colombian President Alvaro Uribe said the meeting "laid the basis for a South American accord which includes the issue of oil, of gas, of alternative fuels, of fuels from agricultural products such as sugar-cane, the African palm, and the issue of hydro-electric power". Also addressed, he said, was the question of inter-connection of fuel pipelines and electric grids, adding: "I hope we can put into practice all this that has been discussed in Venezuela".

Chavez earlier said he and Uribe had agreed to extend to Central America the TransOceanico gas pipeline the two neighbouring countries are now building. The pipeline, which began operations in October, will be able to carry up to 200 MCF/d of gas. For the first five years, it will transport Colombian gas to Venezuela, with the flow set to be reversed in 2011.

Venezuela has the largest gas reserves in Latin America, with Chavez claiming they exceed 180 TCF. Colombia and Ecuador have small, but still significant, petroleum industries. Bolivia has substantial deposits of gas, and Brazil has both oil and gas and is the global pioneer in ethanol. Chavez said he took the opportunity of the summit to present to his colleagues a proposal which "promises to be the first document of a South American energy treaty". He said the Venezuelan initiative "was received with approval by everyone" and that the other governments "began to make their contributions" to the concept. He said the summit served to derail "all those artificial campaigns" about differences over ethanol which Presidents Lula and Bush signed a pact to promote production and use of biofuels.

Though Brazil makes ethanol from sugar-cane, the US uses corn as a raw material, and Chavez - seconded by Castro - accused Washington of planning to snatch food from the world's tables in order to power vehicles. But Caracas has since softened its stance, and Chavez on April 17 said he had no objection to ethanol or other biofuels as long as food production did not suffer. In fact, he told the summit Venezuela wanted to buy 200,000 b/d of sugar-derived ethanol from Brazil and was also ready to purchase the fuel from the US. He said: "It sounds like a joke, but it's not", alluding to his own usually hostile rhetoric towards the Bush administration.

Ecuadorian President Rafael Correa, a Chavez ally, said the summit provided a chance to resolve the ostensible dispute over ethanol. Correa said: "No one opposes ethanol. We believe it is a great alternative, especially when the oil runs out", mentioning Quito's ethanol deals with Brazil. Correa announced an energy co-operation pact with Venezuela which includes a project to build a mega-refinery on Ecuador's Pacific coast to export fuel to China.

In his keynote address to the summit, Chavez spoke of "a world energy crisis being cooked up over a slow flame" which will be accompanied by war and rising geo-political tensions. He said the world had indulged in "unlimited waste" of fuel over the past hundred years and that there were still some who "plan to continue the waste". Chavez linked the excessive use of fossil fuels with the disappearance of frogs in Puerto Rico and bees in the US, as well as the possible extinction of polar bears, phenomena which some have connected to global warming.

Chavez blamed the incipient energy crisis for wars, coups and geo-political tensions, such as the attempt to oust him in April 2002, the US invasion of Iraq and current threats against Iran. He proposed a regional energy model founded on four strategic elements: petroleum, natural gas, alternative energy and conservation. The energy-integration project which he presented to his South American colleagues included a huge network of gas pipelines and development of alternative fuels.

Petrobras has already become an important partner of PDVSA, as well as a client crudes and fuels including LPG. During a visit to Caracas in April 2000, then Brazilian President Fernando Henrique Cardoso discussed Chavez's proposal for a proposed gas pipeline to northern Brazil to be built from Venezuela through the Amazon, and later to run all the way to Argentina. Chavez updated the PA scheme with Lula. Brazil is the biggest market for gas in Latin America. Chavez wants Venezuela to be the main exporter of gas to Latin America. But the pipeline's cost is expected to exceed $26 bn and may not be ready before 2015, even if Chavez and his Latin American partners overcome its ecological challenges (see gmt21VenzExprtNov19-07).

PDVSA and Petrobras are yet to develop four offshore gas fields of the Mariscal Sucre programme, in Venezuela's northern Gulf of Paria, which could eventually be among the sources for the proposed Latin American gas pipeline (see gmt21VenzTransNov21-05). Galp Energia on Nov. 20 said it expected to sign an agreement 20 with PDVSA under which it may buy 2 BCM/y LNG from a plant to be built in the industrial complex of Gran Mariscal de Ayacucho in the state of Sucre in Venezuela. Galp also wants to have a stake in the LNG venture. Reserves in that area are estimated at 11 TCF. The Mariscal Sucre programme was originally conceived as including an LNG export venture, but Caracas has ended Shell's participation in the Mariscal JV after the two sides failed to reach agreement.

Chavez has discussed power inter-connections with Brazil, Mexico and Columbia. He has proposed a unified Latin American grid, including inter-connections with Cuba and the rest of Latin America. A high-tension electricity pylon to carry power to Brazil, in a $400m project three years behind schedule and $85m over budget, was switched on in August 2001 by Chavez and then President Cardoso. The 200 MW line stretches 680 km from Venezuela's Guri dam to Boa Vista in northern Brazil. It has been a timely, if small, contribution to help ease Brazil's power shortage. But it has collided head-long with Venezuela's indigenous communities, mainly the Pemon group, and drawn sharp criticism of the state-owned power firm Edelca (see gmt21VenzNov21-05).