Integrated Regional Energy Systems

von Karina Marzano Franco

Mercosur and its partners

In 2005, a Framework Agreement on Regional Energy Cooperation between Mercosur Member States and Associated States was signed. Almost 10 years later, it is debatable as whether this agreement has fulfilled its goal of advancing regional energy integration.

The Framework Agreement aims to advance regional integration related to the production, distribution, transport and marketing of energy in the signatory countries (Argentina, Brazil, Paraguay, Uruguay, Chile, Colombia, Ecuador and Venezuela). Two main goals are highlighted: the securing of energy supplies and the minimisation of transaction costs of energy exchanges between the States. Moreover, this should be done in a sustainable manner, ensuring a fair and reasonable use of the natural resources .

A first challenge of such integration refers to the agreement´s entry into force. According to its general provisions, the agreement shall enter into force after the forth notification of compliance with internal rules . Only in 2010, for instance, Brazil enacted the Presidential Decree required for its internalization .

Such a delay undermines the impact of a legal instrument that seeks to facilitate the development of energy projects between countries, for which further specific agreements are also needed.

In order to deepen integration between the State parties, regional, sub-regional, or bilateral agreements may be concluded . The areas listed in the agreement are: a) gas and hydrocarbons (commercial exchange of hydrocarbons; interconnection of gas and other hydrocarbon products; cooperation in prospecting, exploiting and industrializing hydrocarbons); b) interconnection of electricity transmission networks; c) renewable and alternative energy.

The importance of hydrocarbons in the region is undeniable. According to OPEC , Venezuela has the world´s largest oil reserves (297.7 billion barrels), followed in Latin America by Brazil (13.1). In the framework of the proposed Petrosur, alliances between national energy operators are expected to coordinate hydrocarbons trade and politics. The complexity of this issue requires a separate analysis, which will be developed in a future report.

In this work, we will focus on the integration of electricity systems and the potential for integration of more environmentally friendly energy resources.

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