Bolivian Govt. to Consider Regional Markets After LNG Flop

Faced with the failure of its project to export liquefied natural gas (LNG) to Mexico and the US, Bolivia should consider the Brazilian, Argentine, Paraguayan and Chilean markets, as well as North America, mining and hydrocarbons minister Alvaro Rios said.

"I think that these are markets we should look at, and not dismiss," government news service ABI quoted the official as saying. Rios acknowledged that the task would now be more difficult, although he has not given up hope of breaking into the North American market. "The market says that he who knocks first, knocks twice," he said. "Unfortunately we didn't knock first."

Bolivia's hesitation hit both its investment image and its pocket. Estimates are that the project would have brought in US$600mn annual income from liquid hydrocarbons and another US$232mn from gas. The government itself stood to have gained US$200mn a year in tax revenues, equivalent to 2.5% of GDP, economic development minister Xavier Nogales said.

The multi-billion dollar Pacific LNG project, led by Spain's Repsol YPF and two British companies, collapsed when the country's political opposition seized on the issue, staging protests against exporting the gas. The demonstrations led to the downfall of President Gonzalo Sanchez de Lozada in October.

However, the country has 56 trillion cubic feet of reserves, and Rios said there is still plenty for export even after the government encouraged local consumption by making residential connections and converting cars to vehicular natural gas (VNG). "Gas is super-abundant both for massive industrialization within the country and also for export," he said. Nogales added that Bolivia needs a rational and systematic hydrocarbons export policy, which would give the country cheap and efficient power to make its industrial production more competitive.

Losing out on the US-Mexican market was confirmed when the would-be offtaker, Sempra Energy, signed a supply deal from Indonesia in December, leaving Bolivia with only Brazil as a current market. Brazil now has monopoly power to try and reduce prices. Moreover, the country still has to clarify the growth of its electric power sector, upon which a large part of its demand for Bolivian gas rests. "We are a little at the mercy of what they want to do in Brazil with their power sector," Rios said. "They also have [regulatory] problems, which drastically affect Bolivia."

According to Nogales, the government proposes three immediate courses of action: speeding up efforts to find new gas markets, encouraging the domestic use of natural gas, and diversifying the range of exportable products along with opening more markets to Bolivian exports.

The government wants to involve state oil company YPFB more closely in the search for new markets. "We have to start negotiating directly with countries such as Mexico or the US and not let oil companies be the ones who decide if they want to buy Bolivian gas to export it," Nogales said. Meanwhile, President Carlos Mesa is due to announce changes to the country's hydrocarbons law this Sunday (Jan.4), local press reported.

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