Venezuela Signs $100 Million Gas Pipeline Deal with Colombia

Colombia will export 150 million metric tons of natural gas daily to Venezuela while an outlet for Venezuelan oil in the Pacific is on the horizon. Colombian President's visit dismissed claims of sour relations between the two nations

Caracas, July 15, 2004—With a firm step towards further energy sector integration with neighboring South American countries, Venezuelan President Hugo Chavez signed a $100 million deal with Colombia’s president Alvaro Uribe yesterday to build a 177 km long natural gas pipeline from Colombia’s northeastern Guarija state to Venezuela’s westerly Lake Maracaibo area, Venezuela´s main oil producing region.

The Guarija-Maracaibo gas pipeline deal was signed in a petrochemical plant that has been out of operation due to a lack of gas to power the plant.  Although Venezuela has the eighth largest gas reserves in the world, it has yet to be developed sufficiently to transport the gas from the country’s eastern most region, where the reserve is located, to Lake Maracaibo, the western most of Venezuela’s regions.  

According to the Venezuelan Minister of Energy and Mines, Rafael Ramirez, the gas will be sent from Colombia to Venezuela for the next seven years but after that time, the flow will be reversed.  “Venezuelan gas will be sent to Colombia, Panama, through a previous plan of integration that will extend to Mexico,” Ramirez said.

Ramirez admitted that Venezuela is 10 years behind in natural gas development and said Venezuela will commit $200 million towards developing an internal pipeline system to connect Venezuela’s distant regions together.  This would include a pipeline from Venezuela’s eastern gas reserves to the Guarija-Maracaibo gas line in the west, where it will form part of multiple pipelines to Panama to access Central American, western US and Asian markets.  

Oil port on Colombia’s Pacific for Venezuela’s Asian exports

Another important development discussed between the two presidents is the construction of a future oil port on Colombia’s pacific coast to access Asian markets for the export of Venezuelan oil.  

President Chavez stressed the importance of the proposed Colombian oil port. “We will continue selling oil and its derivatives to the United States, to Caribbean countries and South America, but there is a market that is very far from us because of a lack of interconnection, that is the Asian market. Imagine a Venezuelan supertanker sailing through the Caribbean and through the Atlantic, crossing the horn of Africa in order to find a route to far away China.  China is very far that way but through Colombia, it’s not. Through Colombia it would be straight shot,” Chavez said during a press conference on Wednesday.

Chavez said yesterday that he met with Chinese investors who want to buy Venezuelan oil for China’s expanding market.  “Recently we were visited by Chinese business leaders who want to invest, through an agreement between Colombia and Venezuela, in multiple pipelines from western Venezuela to the Pacific from which we would have direct access to the vast world that is the Asian market,” Chavez said.

“China is growing and it is a giant that has awaken. It has risen and its growth has taken off, Japan as well. These are countries that need energy for the future,” Chavez said.

Colombia’s Uribe enthusiastic

Colombian president Alvaro Uribe expressed his enthusiasm for the new deal between the two countries pointing to further integration of both countries into Plan Panama Puebla in the near future. “Now that the plan to construct a gas pipeline between Venezuela and Colombia has been finalized, we have to look towards the future. We are making progress towards a larger project, towards the extension of that gas pipeline to the sister republic of Panama. It is the extension of Venezuela and Colombia to Plan Panama Puebla,” Uribe said.

Uribe invited Chavez to a meeting with Panama’s new President Martin Torrijos to discuss Venezuela and Colombia’s adherance to the Puebla Panama Plan which seeks economic integration between Central American countries. Uribe’s statements and his visit overall dismissed claims of sour relations between Venezuela and Colombia. Opponents of Chavez, and U.S. government officials have accused him of providing aid to Colombian guerrillas and of being soft of narcotraffiking.

The Guajira-Maracaibo gas pipeline will be built by Ecopetrol and ChevronTexaco on Colombia´s side and by Venezuela´s state oil company PDVSA on Venezuela´s side.

South American energy sector integration is an important part of Venezuela’s international policy.  In November of 2003, Chavez announced an initiative, PetroSur, at the Congress of Andean Parliaments, which would combine Venezuela’s oil assets with those of Ecuador, Brazil and Trinidad, integrating the continent’s oil resources.