Perspectives to the Southern Cone Gas Balance Using a Game Theory Approach Available to Purchase

For a long time, natural gas has been considered an oil by-product in South America, due to its restricted access to markets and low profitability. During the last two decades, however, significant investments have been made in upstream (e.g. Bolivia and Brazil) and in transportation (e.g. Chile-Argentina and Brazil-Bolivia connections) changing this scenario and making available to customers a cleaner and cheaper fuel. As a result, demand has flourished, as consumers have migrated to natural gas. Nowadays, considering firm and spot clients, such as thermal energy generators, it has surpassed regional supply capabilities. This tight market condition creates an environment of disputes among players, mainly in pricing, as Bolivia has once again nationalized its oil and gas industry to increase its share of the gas chain payoff, and in supply, as Argentina has cut exports to Chile. This turbulence only makes integration more difficult, since industry investments are capital intensive and with very long maturing periods. These issues have to be addressed if the players intend to form a reliable supply chain for consumers, who have to choose between natural gas and its substitutes: mainly coal, fuel oil and diesel. Using a game theory approach to cooperative games, this article analyzes the supply and demand balance perspectives in the Southern Cone. The present work derives the players bargain power from the demand profile and architecture of the transmission system by applying Shapley value concept. This allows an analysis of the consequences of how asymmetrical bargain power and the distortions of the player's actual payoffs vis a vis their Shapley value impact on the region's gas balance. Additionally, this paper addresses how projects and strategies could contribute to develop a sustainable equilibrium in the regional gas balance, where the incentives to non-cooperative actions will have diminished considerably.