Paraguay has no proven natural gas reserves, and it neither produces nor consumes natural gas. In recent years, the country has sought to promote the consumption of natural gas as a way to decrease the use of firewood and charcoal, which has contributed to deforestation in the country. However, barriers to natural gas consumption include a lack of domestic natural gas production and the absence of import pipelines.

Uruguay has no proven natural gas reserves. In an attempt to diversify its energy usage away from oil and hydroelectricity, Uruguay began importing natural gas from Argentina in 1998. Since then, the country’s natural gas consumption has steadily increased, reaching 4.2 billion cubic feet (Bcf) in 2004. The industrial sector consumes the largest share of this total.

Paraguay has attracted some interest from international natural gas companies, with UK-based CDS Oil & Gas announcing in early 2004 that it had successfully completed a production test at its Independencia-1 well in the northwestern part of the country. Other companies that have signed exploration concessions with Paraguay’s government include H.A & E.R. Exploraciones, Pilcomayo Petróleos S.A., Hidroener Consultora, Guaraní Exploration, Union Oil, Paraguay Gas, Boreal Petróleos, Aurora Petróleos and Amerisur. In June 2006, ANACP announced that it had completed an appraisal of potential natural gas reserves in Urugya’s offshore Punta del Este basin. According to the company, the basin contains at least 1-2 trillion cubic feet (Tcf) of potential reserves, though there has not been any actual exploration of the area. ANACP hoped to bring first production from the area onstream by 2015.

Gaseba and Conecta are responsible for distributing natural gas in Uruguay. Gaseba distributed natural gas in Montevideo, whereas Conecta controls distribution in the rest of the country. Gaz de France owns a majority stake in Gaseba. Brazil’s Petrobras has controlled Conecta, since it purchased a majority stake in the company from Spain’s Union Fenosa in 2005.

Paraguay has pursued several natural gas import options. In 2001, Brazil proposed the Gas Integration Project (Gasin), a natural gas pipeline linking Bolivia, Argentina, Paraguay, and Brazil. There has not been much progress to date on the implementation of this proposal. In 2002, the Bolivian and Paraguayan governments signed a preliminary agreement allowing for the construction of a pipeline from southern Bolivia to Asuncion. In June 2006, the two governments approved a plan to move forward with the pipeline, which would have an initial capacity of 700 million cubic feet per day (Mmcf/d) and require an investment of at least $2 billion.

There are two natural gas pipelines connecting Uruguay to Argentina. The first, the CR. Federico Slinger (also know as Gasoducto del Litoral), runs 12 miles from Colon, Argentina to Paysandu, in western Uruguay. The pipeline, constructed and operated by ANCAP, began operations in November 1998 and has an operating capacity of 4.9 Mmcf/d. The second is the Gasoducto Cruz del Sur (GCDS), also known as the Southern Cross Pipeline. Operated by a consortium led by British Gas, the GCDS extends 130 miles from Argentina’s natural gas grid to Montevideo and has a capacity of 180 Mmcf/d. The GCDS project also holds a concession for a possible, 540-mile extension of the pipeline to Porto Alegre, Brazil.

Due to natural gas shortages, Argentina has recently begun interrupting its natural gas exports to Uruguay and Chile. This has raised concerns in Uruguay about the future security of its natural gas supply and jeopardized plans to increase domestic natural gas consumption (see the Argentina and Chile Country Analysis Briefs for more information). As a result, Uruguay has discussed the possibility of importing natural gas directly from Bolivia; in March 2006, Uruguay and Bolivia agreed to launch a study to consider the feasibility of such a plan.