Bolivia Natural Gas 101: what lies ahead?

Carlos Miranda writes in Pagina Siete:

Our gas era and its periods

Carlos MirandaIn the economic history of our country, the economic eras of silver and tin are informally recorded. Now it’s up to natural gas.

Our natural gas was started in May 1972 with the start of export to Argentina under a long term contract (1972-1992).

That quickly marked our export industry characteristics, which are valid to date. Economically cash flow becomes an easy source of revenue for the government of the day. It was technically established that the commercial deposits of our country are gas and condensate, with a small fraction of oil refining and fuels.

That first contract was a success. With those revenues we were able to pay compensation for the nationalization of the private company (Bolivian Gulf Corp.), who had discovered the gas that was exported. The funding necessary to export, the infrastructure (plants and pipeline) was totally paid for.

Additionally, the national state has benefited more than $4,500 million. For these reasons we call the years of this contract as the first period of our gas era.

The second period, which we are living, began with the start of gas exports to Brazil in 1999.

This sale was increased in 2006 with the signing of two contracts to supply gas to Argentina. One of fixed volumes and the other interruptible.

The contracts with Brazil and Argentina end in 2020 and 2027, respectively. So Bolivia became the oldest and largest gas exporter in Latin America.

Revenues being generated in this period are immensely greater than the previous. 15 times larger volumes (± 50 million m3/d), exceptionally good prices (± 5 times higher than the previous ones).

In the last three years (2010-2013) the country’s exports have grown from $2,000 to $6,000 million dollars per year. The gas represents 60%. This giant step has been achieved thanks to three factors: the conversion of gas resource in commercial stocks, the stock market by the need for neighboring countries to have natural gas and eventually exceptionally good prices for the international economic situation. [in other words: events that took place outside current gov’s wrongdoings!]

As we are selling the gas with fixed-term contracts, the question is whether we will have a third period that would begin from 2020, upon termination of the current contract with Brazil.

Will there be accessible markets that could be supplied with our gas?

Will we have enough reserves to supply them? Will there be suitable international prices?

Having surplus gas to export in the near future depends on exploration. We have repeatedly stated that we are behind.

International energy prices, according to forecasts, will remain at current levels until mid-century.

Will there be markets? Also we have repeatedly pointed out that without LNG to export our unique significance to accessible markets are Argentina and Brazil.

So it caught our attention, the official statements in Poland two weeks ago, indicating that Bolivia needs markets for its gas. The international press picked up the story quickly interpreting that the Bolivian gas can reach Eastern Europe.

We all know that’s impossible. However, by not making the necessary clarification, has led to the emergence of political jokes in Washington, Obama criticized for his soft policy in Ukraine, could cause the intervention of President Morales with Bolivian gas to contain the advance of Russian gas, but that would cause other problems.

The rational is to think that there will be a third term. In the worst case we will be producing gas for our domestic market, which is no longer negligible, and as marginal suppliers of Argentina and Brazil.

Carlos Miranda Pacheco. He is an engineer and energy analyst.

The rationale is to think that there will be a third term. In the worst case we will be producing gas for our market.

Published by Bolivian Thoughts

Senior managerial experience on sustainable development projects.

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