A bevy of South American presidents are meeting this week on Margarita island off the Coast of Venezuela to discuss natural gas — specifically pipelines, refineries and the possibility of a regional gas cartel.

The First South American Energy Summit is being hosted by Venezuelan President Hugo Chavez, and the heads of state for Brazil, Bolivia, Chile, Colombia, Ecuador, Paraguay, Peru and Uruguay are expected to be in attendance.

Natural gas is a critical issue for many countries in South America due to growing energy demand and rising costs of generation.

According to the Quito-based Latin American Energy Organisation (OLADE) the region produces around 240 billion cubic metres of natural gas annually and consumes 220 billion cubic metres of natural gas each year.

Electricity generation, which totals 1.116 terawatt-hours (trillion watts), could reach 1.9 TWh within a decade, in a scenario marked by a low level of integration, and 2.3 TWh if a much deeper level of integration is achieved, according to OLADE.

Given that scenario, the natural gas discussion that tends to split the continent between the "haves" and the "have nots."

On the one side are countries like Venezuela and Bolivia that have ample natural gas reserves. Leaders of both countries have signaled very clearly their intent to benefit their populations by greater control over the resources and the relevant industries. On the other are countries like Brazil and Argenina with limited energy reserves and rapidly growing demand.

Chavez's closest ally, Bolivia's Evo Moralez, alarmed many when he nationalized his country's hydrocarbon industries last year and said he would be dramatically increasing fees and tolls on exports. Investors, notably Brazilain and Spanish companies, were dismayed and gas-poor countries such as Argentina became concerned about their access to the resource.

Although fears had eased somewhat, they were rekindled this week as Bolivian protesters seized control of a gas pipeline in the southern border city of Yacuiba on threatening to shut off natural gas to Argentina in a dispute over the boundaries of one of Bolivia's largest natural gas fields.

The dispute is a microcosm of the concerns surrounding Moralez's nationalization program. Two provinces are competing for dominance in the field, the country's largest. The Spanish-Argentine company Repsol YPF holds a majority stake in the San Antonio field, while Brazilian state energy giant Petrobras and French company Total SA own minority interests in its production.

In Argentina, such uncertainty is not welcome where the energy crisis of 2004 is still fresh. That year spiraling costs, limited fuel and worries of an ecomomic breakdown forced the country to reduce natural gas demand by around 7 million cubic meters daily - or some 5% of Argentine natural gas demand. The situation left Argentina at the mercy of natural gas rich countries such as Venezuela. The Argentines want to avoid this scenario in the future.

Supply-demand dynamics could be affected by another pipeline project already in the works. Last month Bolivia and Argentina penned a contract to build a $1.5-billion gas pipeline that will eventually quadruple the volume of natural gas that Bolivia exports to its southern neighbor. The 930-mile Northeast Argentina Pipeline would likely be paid for completely by Argentina.

Meanwhile, Brazil's national development bank has approved a loan for construction of two stretches of the $2.3-billion, 1,400 km Gasene natural gas transport project. In addition, a group of Argentine and Brazilian construction are interested in developing the Gasoducto del Noreste Argentino gas pipeline that would link Bolivia and Argentina.

The next logical step is Chavez' dream project, a continent-wide natural gas pipeline — a subject expected to be discussed in-depth at the summit. Although it is still in the concept phase, the finished pipeline would extend 5,000-miles (8,000-kilometers) and deliver natural gas from Venezuela to Argentina, Brazil, Bolivia, Paraguay and Uruguay.

The most critical aspect for it's success is cooperation among the various players and none are more important than the two largest — Brazil and Venezuela. Yet the two have been on opposite sides of the energy issue fence in recent years. Which is why it is interesting to note the very public message of cooperation being sent by the two leaders this week.

In a prelude to the summit, Chavez and Brazilian President Luiz Inacio Lula da Silva broke ground on a $3.4-billion petrochemical complex that will produce polyethylene polypropylene. The project, located in Venezuela's northeastern Anzoategui state, will be owned 50-50 by binational, private-public partnerships.

The companies involved are Pequiven, a subsidiary of Petroleos of Venezuela SA, PDVSA, and Braskem, a subsidiary of Brazil's Odebrecht.

And Brazilian oil company Petroleos Brasileiros SA Petrobras, remains interested in jointly developing four fields with Petroleos de Venezuela PdVSA, in the Mariscal Sucre natural gas project. The two have been in negotiations over the project for two years and, although the status of the outcome remains murky, it is a cornerstone piece the pipeline effort.

So although many of these projects are still "pie in the sky" the ability for them to become reality rests in the progress made by the various leader meeting on Margarita island.