Bolivia Aims to Double Gas Output but Private Spending Uncertain

RIO DE JANEIRO Oct. 19, 2007 (Dow Jones Newswire)

Bolivia wants to double its natural gas output in five years, its hydrocarbons minister said Friday.

Yet, it is still unclear where the necessary investment in new exploration and production to meet that goal would come from.

Bolivia's government expects gas production to double to 80 million cubic meters a day by 2011 or 2012, Hydrocarbons Minister Carlos Villegas said at a press briefing and conference call from Washington, where he is attending meetings of the International Monetary Fund and the World Bank.

Over the past 10 days, the government has been in talks with private oil companies, which it wants to require to step up investments, Villegas said. Companies are expected to announce definite investment plans for 2008 by mid-December, he said.

Those "investments aren't only to maintain current production, but to actually increase it," Villegas said.

Foreign oil companies - in the wake of the 2006 nationalization of Bolivia's oil and gas industry - have limited investments to a minimum needed to keep current production levels.

Some companies have argued that new production contracts imposed on them by the government that hike taxes and royalties on output to about 80%, make large new investments unprofitable.

Bolivia's government expects to gain $1.6 billion in revenue from hydrocarbons production this year after $1.357 billion last year, Villegas said. In five years, the government expects that revenue to at least double.

The government in recent months has stepped up pressure on foreign firms to either increase investments, or else leave the country.

The Hydrocarbons Ministry in September said oil companies had pledged to invest $588 million in 2007, of which $254 million represented capital expenditures and $334 million in operational costs.

Villegas on Friday, however, said any figures given previously were only tentative numbers, and it will only be known on Dec. 15 how big the companies' investments will actually be.

The government thinks that most of the increase in gas output should come from a boost in production at the country's four-biggest producing fields: the Itau field operated by French energy company Total SA (TOT), the Margarita field operated by Spanish energy firm Repsol-YPF (REP), and the San Antonio and San Alberto fields operated by Brazil's state-run oil firm Petroleo Brasileiro SA (PBR).

"Those fields are high priority," Villegas said. "We will guarantee judicial security to the companies" operating them.

Both Petrobras and Repsol in the past years have repeatedly complained about how Bolivia was pursuing its energy nationalization. Petrobras even had threatened to seek international arbitration, but later accepted Bolivia's terms.

Brazil currently is still dependent on gas imports from Bolivia, which cover half of its gas supply needs. Petrobras has a long-term contract to import up to 30 million cubic meters of natural gas a day from Bolivia.

Villegas added that Petrobras was currently drilling an exploration well at the Ingre field, and that Repsol was drilling a well near the Margarita field, both of which could render additional production in the future.

A joint-venture between Bolivia's and Venezuela's state-energy companies, Yacimientos Petroliferos Fiscales Bolivianos and Petroleos de Venezuela SA (PVZ.YY), or PdVSA, was also going to explore blocks in nontraditional areas in the highlands north of La Paz, Villegas said.

Also, Total currently is drilling an exploration well at the potentially huge Incahuasi find, he said, where it had hit gas in 2004.

Villegas's comments on output come after the government earlier this year admitted that Bolivian gas production was reaching its limit, making it difficult to meet export commitments to Brazil and Argentina.

Supplies to those two countries, alongside a rising domestic consumption, continued to be a priority for Bolivia, Villegas said Friday.

He insisted that the expected production increases will guarantee that Bolivia can also meet commitments for an increase in gas exports to Argentina by 20 million cubic meters a day over the next couple of years.

But the government was also eying "probable" gas exports to Uruguay, Paraguay, and "possibly" to Chile, Villegas added.

Exports of liquefied natural gas, or LNG, were also a possibility for the future, but currently exports via pipelines was the more lucrative option, the hydrocarbons minister said.

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