Shengli, YPFB Line Up 7 Contracts in Bolivia

Chinese oil company Shengli Oilfield International Exploit plans to sign about seven contracts with Bolivia's state oil company YPFB from November 20 to December 30 this year, a Shengli spokesperson told BNamericas.

The contracts will include at least one 1,500MW thermoelectric plant near Villamontes on the border with Argentina, a 600,000 tons/year polyethylene plant, two refineries (the respective sizes of which are presently under consideration), the installation of 40,000 vehicle conversion kits and 250,000 residential gas connections, and doubling the service station network of state oil company YPFB to 80 outlets.

Shengli and YPFB will also sign exploration and production contracts for about 10 blocks located in the Chaco and Chapare areas of Bolivia as well as in the country's north, and build a pipeline from the wells to their petrochemicals plant, the location of which has yet to be decided. Engineering studies on the blocks will begin in about two weeks to decide where to start drilling, the spokesperson said.

Shengli aims to export most of the polyethylene produced by the plant to China, where demand far exceeds supply, so it needs a reliable source of gas which means controlling the production chain from drilling wells through to transport and delivery, the spokesperson said.

Shengli aims to bring in Chinese technology for the exploration and production stage, while Shengli and YPFB engineers will work together on the ground.

The consortium will likely subcontract local companies to help build the petrochemical and thermoelectric plants.

China's investment in Bolivia could eventually far exceed the US$1.5bn previously disclosed, but the reason the company has announced a relatively low figure at this stage is to ensure Bolivians do not perceive the project as yet another attempt by foreign companies to gain control of the country's resources, the spokesperson said.

The Chinese company has succeeded in obtaining the support of the Bolivian government where other western companies have failed, because it has accepted that Bolivians want control over their own resources, which means allowing YPFB to have a 51% controlling stake in the contracts, the spokesperson said. "The state is participating directly in these contracts," the spokesperson said. A project to export liquefied natural gas (LNG) to North America has stalled in Bolivia partly because Bolivians fear they would be giving away their resources to foreign firms.

The idea is for Shengli and YPFB to create a 49:51 joint venture through which Shengli will put up the capital that YPFB lacks for exploration and production, refining and industrialization, transport and trading, thermoelectric power generation and manufacturing equipment to use gas residentially and in vehicles.

Shengli signed a preliminary strategic alliance with YPFB on September 2, and China's national bank has provided YPFB with a US$15mn guarantee of Shengli's investment plans.

The Chinese company plans to open an office in Santa Cruz by October 27, and some 26 Shengli engineers are currently in Bolivia working with YPFB on seven separate committees to determine the details of each contract. Each contract will have its own board and management consisting of Shengli and YPFB officials, the spokesperson said.

Shengli's president Nie Shaoguang and other officials met with Bolivia's President Carlos Mesa on October 20 and ratified their commitment to invest a minimum of US$1.5bn in Bolivia's hydrocarbons sector, government news agency ABI reported.

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