Uncertainty Surrounding Bolivian Gas Exports
Bolivia's ability to meet gas export agreements with Argentina and Brazil remains far from certain given its production levels and the challenges the country faces in attracting foreign investment, industry experts told BNamericas.
Brazil's federal energy company Petrobras (NYSE: PBR) has a 20-year agreement to import as much as 30Mm3/d from Bolivia's state oil company YPFB through the 3,000km Bolivia-Brasil gas pipeline. The two are working to sign an agreement to increase gas volumes.
YPFB and Argentina's state oil firm Enarsa this year signed an agreement that calls for a gradual increase of gas exports, with 7.7Mm3/d to reach Bolivia's southeastern neighbor by year-end, 16Mm3/d by end-2007 and a 27.7Mm3/d export level set for the 2010.
Bolivia aims to satisfy the combined 57.7Mm3/d demand from Brazil and Argentina with more than US$1bn in E&P investments.
The problems facing Bolivia, however, are daunting. First, investors who are wary and upset over Bolivian President Evo Morales' nationalization process are unlikely to invest heavily in Bolivia's upstream sector.
If investment in Bolivia is frozen, the country's net exports would peak at some 35Mm3/d in 2008 and then fall to 30Mm3/d. With minimum investment, net exports would be less than 40Mm3/d through 2010, Sophie Aldebert, Cambridge Energy Research Associates' (CERA) Southern Cone associate director said in a presentation at the 3rd Annual Energy Integration Congress in Buenos Aires hosted by BNamericas and International Business Communications.
Bolivia will not have enough capacity to comply with contractual terms without any real investment.
"We tend to say there is still a fairly strong possibility that [existing] companies will invest, at least to maintain deliverability for contracts," Aldebert said. "That doesn't mean quality of flow will be maintained."
However, the regional manager of Deloitte Petroleum Services, Mauro Andrade, has a grim outlook on the situation.
Andrade said Bolivia could attract investments in the long run but doubts it will be able to comply with contractual agreements.
"I'm not saying it's not possible, I'm saying that, given the whole environment, it's unlikely," Andrade said. "It's difficult to imagine Bolivia will be able to attract investments again within one year," he said.
Merrill Lynch analyst Frank McGann echoed this sentiment in a presentation, saying the risk is industrialization will be delayed in the short and medium terms.
With time, a willingness to invest will eventually normalize, McGann said, adding the nationalization process will hurt the country's ability to attract capital for some time.
Bolivia's government over the weekend signed agreements with the 10 companies that operate in its hydrocarbons industry as part of the nationalization process. Petrobras, the largest foreign investor in Bolivia's hydrocarbons industry, has since expressed a willingness to continue investing in the country.
Bolivian officials have said Enarsa or Venezuela's PDVSA, for example, could boost investments in their country, although the state companies' willingness and ability to carry out such works is not guaranteed.
Despite Bolivia's plans to continue gas exports to Brazil and Argentina, the country has long desired to add value to the resource by developing gas-fired thermoelectric plants primarily for power exports as well as export-focused gas-to-liquids (GTL) plants.
Local company GTL Bolivia aims to build a US$460mn GTL plant in Santa Cruz province that would consume 3Mm3/d gas, GTL Bolivia executive VP Luis Carlos Kinn said in a presentation.
The company also aims to build a US$2.41bn GTL plant that would consume 30Mm3/d.
The first plant alone could squeeze Bolivia's prospectively tight gas supply and cast even more doubt on the country's ability to meet its contractual agreements.
"If Bolivia decides to build a GTL plant in the future, let's say five years from now, I don't think Brazil will be able to live without Bolivian gas," Andrade said.
"Perhaps in 2011, the situation in Brazil will be much better than now, but from now until 2010, if Bolivia cuts a single cubic meter, we will be in trouble for sure."
Southern Brazil and growing Sao Paulo industries are highly dependent on Bolivian gas. And although gas makes up only 9% of Brazil's energy matrix, the resource is needed to supply increasing demand from industry and power plants in case new hydro projects cannot advance.
But Brazil is planning two LNG re-gasification terminals and carrying out E&P in the southern offshore Santos, Espirito Santo and Campos basins.
Brazil delayed E&P works in the offshore areas as a result of its relative comfort in importing cheap gas from its southwestern neighbor and is now advancing plans to diversify its gas supply.
"Ties with Bolivia are far from severed and the relationship with Bolivia will continue. Brazil is dependent on Bolivia, but wants to diversify," Aldebert said.
As Brazil scrambles for other future gas supply sources, the country is hoping gas imports continue in the south.
"From now until 2010-2011, we need 30Mm3/d from Bolivia," Andrade said. "We can't afford a cubic meter less."
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