January 25, 2008 / 8:00 PM / 11 years ago

UPDATE 1-Work on Bolivia-Argentina gas line to start in July

(Updates with details on companies in the running to provide tubing for pipeline)

BUENOS AIRES, Jan 25 (Reuters) - Construction of a $1.8 billion pipeline that aims to quadruple the flow of natural gas from Bolivia to Argentina will begin in July, after several years of delay, the Argentine government said on Friday after a meeting between the leaders of the neighboring countries.

Bolivian President Evo Morales and Argentine counterpart Cristina Fernandez de Kirchner opened the bidding process to provide the tubes for the pipeline.

The project was announced in 2003 but never got off the ground due to political instability in Bolivia, where disagreements over how to exploit natural gas resources led to uprisings that toppled presidents in 2003 and 2005.

The Bolivian government had said in March 2007 it expected construction of the pipeline to start later that year.

“The pipeline is expected to start operating in January 2010,” Argentine Planning Minister Julio de Vido said after the leaders met in Buenos Aires.

Siat of Argentina and Tubacero of Mexico have been named finalists to win a contract to supply tubes for the pipeline, the Argentine government said in a statement.

The 1,465-kilometer (910-mile) gas pipeline would allow Bolivia to boost its exports of the fuel to its energy-hungry neighbor, although some analysts question whether it will be able to increase output in time to meet the new demand.

Bolivia currently has a contract to sell up to 7.7 million cubic meters a day of gas to Argentina, its second-biggest customer after neighboring Brazil, but it has struggled to supply that over the past year.

The pipeline would carry up to 27.7 million cubic meters of gas to Argentina.

Sizzling economic growth has increased demand for energy in Argentina, where energy shortages during the last Southern Hemisphere winter forced the government to impose restrictions on industrial use.

In December, the government rushed through a law to impose a light-saving hour change in an effort to stave off similar shortages during the sweltering summer months as Argentines crank up air conditioners.

In 2006, Morales announced the nationalization of the energy industry in the impoverished country, which has South America’s second-largest natural gas reserves after Venezuela and is the top regional exporter of the fuel.

That led some firms to shelve investment plans, although Brazil’s Petrobras (PETR4.SA) (PBR.N) — the top foreign investor in Bolivia — said it would invest up to $1 billion to increase production and explore for new reserves. (Reporting by Lucas Bergman; Writing by Helen Popper; Editing by Walter Bagley)

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