YPFB: Petrobras Owes US$100mn on Natural Gas Payments

Brazil's federal energy company Petrobras has failed to pay the last two bills for natural gas purchases from Bolivia's state oil company YPFB, as well as a series of other commitments, and has run up debts of more than US$100mn, according to YPFB president Raul Lema.

Petrobras is refusing to make the payments as it questions a series of issues in the 20-year gas supply agreement (GSA), all of which have been rejected by YPFB, Lema told BNamericas. "The relationship between the two companies is not of the best...the relationship is distinctly turbid," Lema said.

The backdrop for this dispute is the ongoing negotiation over modifying the GSA, requested by Petrobras under article 15, which allows talks to change terms if market conditions are deemed to have varied since the contract was first signed. Petrobras wants to cut the volume and price of natural gas purchases from Bolivia because demand has been lower than expected and the price has been hit by the depreciation of the Brazilian real against the US dollar.

In particular, Petrobras is keen to reduce its take-or-pay commitments. Under the take-or-pay contract terms the company is supposed to be buying about 21 million cubic meters a day (mcm/d) of natural gas from YPFB but actual consumption is flat at around 12mcm/d. A preliminary report by Bolivia's mines and energy ministry states that the country would sacrifice revenues of about US$1.96bn through 2019, when the GSA expires, if it agrees to the new terms requested by Petrobras.

Lema said that this figure is very vague and could vary in either direction depending on a number of different factors. Brazil's energy and mines minister Dilma Rousseff will make an official visit to Bolivia on April 3, including meetings with Bolivia's President Sanchez de Lozada and the new hydrocarbons minister Jorge Berindoague.

Although the governments have not yet stepped in formally to intervene in the talks between YPFB and Petrobras, the GSA talks are likely to be high on the agenda, and to come before a third meeting between YPFB and Petrobras scheduled for April 8-9 in Bolivia. The first meeting between the two companies was held in Santa Cruz in January, followed by a second meeting in Rio de Janeiro in early March, Lema said.

Ahead of the meeting in La Paz in April, YPFB has met the aggregators' committee that represents producers providing natural gas for export to Brazil, which includes operators such as Anglo-Dutch Shell, UK-based BP and, of course, Petrobras, which is one of the partners in the giant San Alberto and San Antonio gas fields, he said, without revealing the details of those conversations.

YPFB acts as the aggregator for these natural gas producers, and delivers the natural gas to Petrobras at the border town of Puerto Suarez through the Bolivia-Brazil pipeline. YPFB believes that the emphasis is on Petrobras to meet its commitments under the GSA. Lema pointed out that it has similar commitments under the GSA's "delivery-or-pay" terms and would be subject to penalties if it failed to deliver sufficient gas. YPFB has done its "homework" and natural gas reserves in Bolivia have grown almost ten times to 53 trillion cubic feet (tcf) since the GSA was signed, and now it is up to Petrobras to meet the commitments that it undertook, Lema said.

If YPFB and Petrobras cannot reach an agreement then the issue is likely be taken to international arbitration, Lema said. However, he expressed a note of optimism saying that the visit by minister Rousseff was a gesture of good faith that has been well received by the Bolivian authorities.

Both companies are ultimately owned by the two governments, which means that they are in a position to intervene, he said, adding that a positive outcome from the meetings between the two governments would hopefully rub off on the YPFB-Petrobras meetings just a few days later, he said. Brazil's government has already indicated that it wants to treat the natural gas discussions as a bilateral issue that affects the two countries' strategic relationship.

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