Bolivian Hydrocarbons 101: Natural gas “nationalization” was a failure, coincide experts

Important information produced by Pablo Peralta and published in Pagina Siete; a bit lengthy but it is the Bolivian Hydrocarbons 101, as a result of current government’s politics and policy:

The graph to the right, shows the levels of oil and gas production (bars above); below the increasing levels of GLP and diesel imports:

The full article follows:

Almost one hundred days after taking his first term, Evo Morales stamped on 1 May 2006 his signature to the Decree 28701, nationalized oil and recovered “ownership and total and absolute control over these resources”. But six years have passed and the balance is negative, say four specialists.

Criticism is that the process does not reach the expectations generated in the area of industrialization, one of the main issues.

In March, Energy Press reported that YPFB will concrete four projects to industrialize the gas: two liquid separation plants, one of ethylene – polyethylene production and a production of urea and ammonia. On this last, Vice President Álvaro García Linera said on Thursday: “Not a single minute is in doubt” that plant will be installed in Cochabamba, which involves an investment of close to $ 1.1 billion.

Analyst Hugo del Granado argues that progress in this area is “zero”, since there is no molecule of gas or oil that may have “even perspectives” to go under a process of industrialization, and more to the contrary continues to be [just] a plan of what the Government intends to do.

The lack of industrialization, joins a drop in the production of liquids, which prompted the increase in imports of liquefied petroleum Gas (LPG), diesel and additives to produce gasoline.

Exploration, discoveries of new deposits and reserves of gas, which fell 28.7 trillion cubic feet (TCF) registered in 2003 to 9,94 in 2011 were also reduced.

Because of these elements, experts agree that the balance is not positive. They add that private investment fell by legal insecurity in the country; although from official areas, it was announced for this year more than $ 2,050 millions of dollars in the sector will be invested.

Pagina Siete tried to arrange an interview with authorities of the Ministry of hydrocarbons and Yacimientos Petrolíferos Fiscales Bolivianos (YPFB, the state-owned hydrocarbon company) to have a counterpart [opinion for this article]. However, despite requests to their press units and, in the first case, consultations via email, it wasn’t successful.

“The nationalization should have generated us greater independence and it is the opposite. We have huge imports of oil, diesel, LPG, petrol derivatives and an initial challenge in any nationalization is to generate independence (…) economic and self-sufficiency in production”, says Marco Gandarillas, director of the Center for Documents and Information Bolivia.

The oil Ministry data showed that liquids production fell from 49,496 barrels per day in 2005, to 44,362 in 2011. In addition, imports of LPG in 2011 reached 92.37 metric tons per day, a 64% increase in relation to the 2010; While the diesel in 2011 were 407,789 barrels per month, 12% more than in 2010.

“Bolivia with this Government has lost its self-sufficiency in energy, and there has not been discovery of new deposits”, said del Granado.

Carlos Miranda, a specialist in hydrocarbons, argues that “the exploration is practically non-existent”, and that wells like Incahuasi “are not products of nationalization”, but are part of projects that were underway prior to the measure.

YPFB reported in an offprint in February that this year 30% of the 2,050 million dollars announced for investment will be for exploration. García Linera said on Thursday that the oil sector have in the next eight years a great investment for exploration, exploitation and industrialization, according to ABI [government’s news agency].

But Economist Mauricio Medinacelli indicates that a barrier for private investment is the new Constitution, it contains an “excessively difficult for the exploration and petroleum exploitation” regulatory framework.

To boost oil production, the Executive launched the Decree 1202, it gives to the oil companies as a incentive $30 tax credit (Nocres) notes and $10 in cash.

Miranda says is a good measure, but which would be ineffective, because there are no important deposits without being worked, and those that are existent, are depleted; furthermore as there was no exploration, there are no new deposits.

The bulk of the oil income is not due to the nationalization

Most of the oil income which receives the country does not come from the nationalization of 2006, but the 3058 hydrocarbons law, which was set up a year earlier. [meaning in a previous government to this one]

Oil specialists agree with this idea, also they argue that there was no nationalization in the sense of the “Orthodox” word, which involves an expropriation of capital and expulsion of the companies.

“Six years after the Decree of May 1, 2006 it can be said that there was not such nationalization, but buying forced shares, because they have bought the shareholder participation of enterprises, to form what are subsidiaries: Transport, Andina and Chaco”, explains Hugo del Granado.

This specialist explains that from the economic point of view, there have been raising large sums of money, due to the 3058 Law, which creates the direct tax on hydrocarbons, “and not [due] to the nationalization”.

In January, in an interview for Pagina Siete’s section ‘working breakfast’, the President of Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), Carlos Villegas, responded in this way to a question in this direction: “in 2011, the IDH [tax on hydrocarbons] generated $1,347 million, royalties $687 million, this is 3058 Law. During 2011, with the Operation contracts, YPFB earned $ 619 million, that is by the nationalization, is a significant amount (…)”


Andrés Soliz Rada Ex Minister of Hydrocarbons, the Vice-President Alvaro Garcia and former Minister and now President of Yacimientos Petrolíferos Fiscales Bolivianos, Carlos Villegas, should answer these questions: when will they release the final report of the Ryder Scott on our oil and gas reserves? When will they disseminated the audits made to the oil companies, kept in reserve for six years?

Why don’t they order to Repsol and the Assembly of the Guarani people to publish the hidden agreement signed on March 2011, to create an investment fund of $ 14.4 million, which the oil company pays $140,000 per month to the natives of the area, which will hinder the construction of a vital pipeline between mega fields and the salar de Uyuni? [salt plains in Potosi] (Will any parliamentary be interested in this topic?)

Why is YPFB unable to bring gas to the Mutún to make viable the steel industry? Such disability, does not show that the Decree of nationalization of the 1-5-6, which says that Bolivia has “recovered the total and absolute control of its hydrocarbons”, is it only paper? Why, at the end of 2009, was changed the contract for the sale of gas to the Brazil, reason by which Bolivia, commits itself to deliver the gas with high caloric value, setting aside the possibility of developing its own petrochemical, making it easier for the neighboring country to become self-sufficient in fertilizers processed with our raw [hydrocarbon]?

Why YPFB has not become a modern corporate company like Petrobras, whose operation is based on transparency?

Frightening conclusions which this government needs to address in a professional, technical manner, rather that placing a political show and discourse to cover the obvious…

Published by Bolivian Thoughts

Senior managerial experience on sustainable development projects.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: