Kirchner Signs Letter of Intent to Import 2.5mcm/d More Gas

Bolivia's President Carlos Mesa signed a letter of intent with his Argentine counterpart Néstor Kirchner on Thursday (July 22) to expand the volume of a six-month gas export contract by 2.5 million cubic meters a day (mcm/d) to 6.5mcm/d, a spokesperson for Bolivia's hydrocarbons ministry told BNamericas.

The increase will take effect "almost immediately," the spokesperson said, adding that details of the increase, including whether it would be all at once or gradual, would be available on Thursday night.

The Presidents, meeting Thursday in Bolivia's Tarija department, could also have agreed to extend the term of the contract beyond six-months, the spokesperson said. Bolivia's government agreed in April to export 4mcm/d to Argentina for six months to help relieve its neighbor's gas crisis.

The exporters are the Bolivian units of Spain's Repsol YPF (NYSE: REP) and Brazil's Petrobras (NYSE: PBR).

The idea is to expand the terms of the contract in line with the results of the national gas referendum held on Sunday (July 18).

In the longer term, Argentina plans to import up to 30mcm/d from Bolivia through the proposed Gasoducto del Noreste Argentino (GNA) project in northeastern Argentina. "The longer term plans must wait for the construction of the new Noreste pipeline," the spokesperson said.

The Presidents excluded this pipeline from the letter of intent because of criticism in Bolivia of the government's plans to expand the existing export contract before the new hydrocarbons bill has been approved by congress. Bolivian voters have given Mesa the green light to reform the hydrocarbons law and he plans to present the bill to congress in the second week of August, after which congress would have three months to vote on it.

"It's a bit counterproductive to begin to sign the contracts for the future without having the new legal framework in place," the spokesperson said, adding, "[the Presidents] just agreed to this 2.5mcm/d increase now and they will leave until a bit later the other contract when they can work a bit more calmly."

The GNA project would use part of an existing pipeline between the two countries that was used to export gas from Bolivia to Argentina until the 1980s. Construction of the US$1bn, 1,500km pipeline should wrap up in 2006.

Argentina's government has hired local construction firm Techint to build the pipeline and Techint will invest US$750mn, or 75%, of the capital, while the government will put up the rest. The pipeline will connect to Argentina's existing Loma de la Lata pipeline operated by local gas transporters TGN and TGS, and could be extended to Paraguay and Brazil in the future.

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