Fagundes, Edmar; D’Apote, Sylvie; Trebat, Nicholas
UFRJ
The Southern Cone’s natural gas industry has undergone fundamental changes and rapid growth in the last decade. Starting in the early 1990s, widespread gas sector reforms, which have generally been part of wider economic and energy-sector reforms, have opened to private and foreign investment a sector previously largely reserved to the state. The objective of this paper is to analyze the structure of the gas industry in the Southern Cone, with the aim to identify incentives and barriers to competition. The paper assesses market concentration in the upstream and downstream segments of the industry for each country and for the region as a whole. Additionally, it analyzes the main players’ asset base, in order to evaluate their incentives for adopting cooperative or competitive strategies. The analysis identifies important obstacles for the introduction competition in the Southern Cone’s natural gas industry. It shows that while there is little room for competition at the country level, the potential for competition is greater at a regional level. Hence, regional integration of individual gas markets would contribute to increase competition without radical changes in the individual countries’ gas industry structure. This can be done through an appropriate regulatory framework, which would gradually reduce the level of vertical integration and barriers to entry.
