Consultancy: Solution to Bolivian gas problem is better planning

Thursday, January 15, 2009

Bolivia, Argentina and Brazil could find a solution to their natural gas problems by coordinating the three markets, taking into consideration supply, peak demand and hydrology, consultants with Gas Energy Latin America told BNamericas.

The problems started last week when Brazil said it would reduce gas imports from Bolivia by as much as 30%. High-level meetings between Brazil and Bolivia partially resolved the situation, allowing Bolivia to continue exporting 31Mm3/d by increasing supplies to Argentina and slightly curtailing shipments to Brazil to 24M-26.2Mm3/d from 30Mm3/d, including new shipments to the stalled Cuiba thermal plant.

But Argentina may not need the increased gas shipments, which are due to rise to 7Mm3/d from the 2Mm3/d it had been receiving in recent months. Given that demand is down, there is enough local production and most interruptible thermo generators in the country can run on multiple fuels, Argentina may prefer to burn fuel oil that costs US$4-5/MBTU rather than Bolivian gas at US$7-8/MBTU, Gas Energy Latin America partner Alvaro Ríos Roca said.

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"The same question is raised if Argentina passes on the gas to Chile, whose systems can burn fuel oil, diesel and so on," he said. "Someone will have to take a loss."

Argentina and Brazil may have had political considerations in mind when they made the new deal with Bolivia, Gas Energy partner Marco Tavares said.

Either way, Bolivia faces a difficult situation in the coming six months given lower demand for its gas in Argentina, Brazil and indirectly Chile, Ríos said, adding his company has models that could help resolve the situation.

"The shortage of production leaves the country with less revenue... and without capacity to produce liquids, especially much-needed gasoline," he said.

Negotiations could start again in April-May if Brazil then decides it needs to increase natural gas imports, an official with Bolivia's state oil and gas company YPFB said earlier this week.