ENERGY: BOLIVIA, URUGUAY AND PARAGUAY INK GAS PIPELINE DEAL

Asuncion, Paraguay, 20 April (AKI) - In a move to integrate the region's energy markets, the presidents of Bolivia, Uruguay and Paraguay agreed on Wednesday to study a project for a 6,000 kilometre pipeline linking the three south American countries that would cost an estimated 450 million dollars. The three countries agreed to have a concrete answer on the feasiblity of the project by the end of this year, Uruguay's president, Tabare Vazquez, was quoted as saying.

The proposed pipeline would carry gas from Villamontes in Bolivia to Uruguay, passing through Casado, Paraguay. The project does not currently depend on the planned giant pipeline to carry gas from Venezuela - which has South America's largest gas reserves - to Brazil and Argentina, spearheaded by Venezuela's president Hugo Chavez in his drive to curb US economic influence in the region. This would carry gas more than 7,000 km through South America, at an estimated cost of 23 billion dollars.

The massive Venezuelan pipeline could be ready by 2012, but faces concerns from environmental groups that it would devastate parts of the Amazon rain forest. It would be complemented by the smaller project connecting Bolivia, Uruguay and Paraguay, according to Chavez. He on Wednesday travelled to Asuncion to meet Vazquez as well as Evo Morales, president of Bolivia - which has the continent's second biggest gas reserves - and Paraguay's president Nicanor Duarte.

"My aim is for these three brother countries to integrate their gas pipeline with the Brazil-Argentina pipeline...we believe your incorporation in this project will make gas the backbone of the region's full integration," Chavez told his counterparts in Asuncion, adding that Caracas is prepared to provide technical input to the smaller pipeline.

Brazil and Argentina's absence from the Asuncion meeting is being seen by some observers as a reflection of a crisis within member countries of the Mercosur regional trading bloc. Venezuela - the world's fifth largest oil exporter - is due to become a full voting member of Mercosur by the end of 2006. Chavez has stated that Mercosur must undergo profound reforms in the current century - notably moving away from "neoliberal" economics - or it could "die".

Paraguay and Uruguay are founder members of the bloc, while Bolivia has associate member status. Until now Uruguay and landlocked Paraguay have imported gas for Brazil and Argentina but are now ready to take a punt on Bolivian gas to reduce their costs.

The two countries already have a plan to build a 500 km gas pipeline extension from the southern Bolivian city of Tarija to northern Paraguay, tenatatively planned to be operating in two years.