Bolivia's development hinges on gas exports

Friday, September 2, 2005

Bolivia's government will do all it can to export natural gas within the Southern Cone and to North America, as the resource is key to domestic development, the country's consul general to Chile, Víctor Rico, said Friday.

"Gas is fundamental: the development of gas exports and the industrialization of gas is the opportunity to leave underdevelopment [behind]," he told a meeting of foreign correspondents in Santiago. "It's as clear and simple as that."

Exporting Bolivian gas has not been easy, and after the debate over which port to use to export liquefied natural gas (LNG) dragged on for years, the investors in Bolivia's proposed LNG project walked away to concentrate on opportunities elsewhere.

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Regaining maritime sovereignty is Bolivia's number one priority, Rico said. Gas would "of course" form part of any maritime discussion with Chile, the country that took Bolivia's coast away after a war in the late 19th century.

But selling LNG to North America is not Bolivia's only export option, as there are hungry gas markets much closer to home, Rico said.

Exports to Brazil, which are currently some 24-26 million cubic meters a day (Mm3/d), could rise to 30Mm3/d as that country makes use of 100% of the capacity on the existing pipeline linking the two countries.

Exports to Argentina are currently some 7Mm3/d, which could also rise to 30Mm3/d in coming years if a proposed pipeline linking Bolivia's gas-rich Tarija department to northeastern Argentina is built, Rico said.

But even exporting that much gas to Argentina and Brazil as well as 10-12Mm3/d to Paraguay and gasifying the Bolivian economy so that all vehicles, houses and industries use gas, the country would still have reserves for 100 years, he added.

Bolivia's certified gas reserves stood at 56 trillion cubic feet at end-2004, a year in which production was 362 billion cubic feet. The importance of gas to the economy is shown by the fact that in 2004 gas exports of US$620mn represented 27.5% of the country's US$2.254bn total exports. Together with other goods such as natural gas liquids that are by-products of gas production, hydrocarbons exports were US$847mn, 37.6% of total exports.


In August the vice-chancellors of Bolivia and Paraguay met in the Bolivian city of Tarija and agreed on producing a framework document for a natural gas pipeline from Bolivia to Paraguay and possibly on to either Brazil or Argentina.

Quantities would be small, and part of the deal would see Paraguay give Bolivia a duty-free area on the Paraguay river to distribute gas-related products, Rico said. As presently envisaged, the pipeline would involve at least some private capital.

The pipeline has been on the table for some time and in 2002 was reported as running 850km from Tarija to Vuelta Grande and Asunción in Paraguay, with branches running west to the country's three main markets: Vallemi, Ciudad del Este and Encarnación.

Pipeline diameters would vary between 10 and 18 inches and investment would be some US$226mn.


The main pipeline project in the region is the Gasoducto del Sur, which in theory at least would take gas from Peru's Camisea gas fields to Chile and then on to Argentina and Brazil.

Bolivia is participating in meetings with the six countries interested in the line's development - Brazil, Uruguay, Paraguay, Argentina, Chile and Peru, but because it has not committed yet, the project dropped its original name of Energy Ring (Anillo Energético) because without Bolivia there would be no ring.

Rico would not comment on whether or not Bolivia considers the project to be necessary and said the decision would be made once the legal framework for the project is settled.


A number of foreign operators have frozen investments in Bolivia, deterred by the 50% government take through royalties and taxes and the migration of existing contracts to new joint venture contracts in partnership with state oil company YPFB.

Rico called for a balance between the interests of companies wanting to maximize profits and the interests of the Bolivian state and society. "Ninety percent of the population [in Bolivia] is not in disagreement with multinational companies from wherever exporting and working with Bolivian resources, but they want the benefits of that production to be shared, not even with the state but with society," Rico said.

"This balance is what we have to find in Bolivia and once we find [it], the development of the hydrocarbons sector will be very important and allow us to get out of poverty and hopefully reach the levels of a developed country," he said.

Finding the right point of balance "will not be easy, but I'm convinced we'll get there," he added.