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Bolivia's gas future

Carlos Villegas

President/YPFB

Published  Friday, October 16, 2009

Over 3,000 businessmen, government officials, journalists and academics from 82 countries met in Buenos Aires the first week of October for the 24th World Gas Conference.

One of the many issues at hand was the need for international and regional integration for gas to compete and flourish in the 21st century - especially in response to the economic crisis, which saw global gas demand and gas prices drop markedly this year.

In Latin America, Bolivia has the second largest reserves of natural gas after Venezuela. It is a net gas exporter, with supply contracts with Brazil and Argentina. About four fifths of its gas exports go to Brazil, and the remainder go to Argentina.

While Brazil's federal energy company Petrobras officials expressed their desire at the conference to continue contracting gas from Bolivia after the agreement ends in 2009 - despite the huge unearthed gas potential of its own pre-salt offshore area - negotiations with Argentina, including the construction of a US$1.64bn gas pipeline between the two countries, have proved tricky.

The nationalization of the hydrocarbons sector in Bolivia has also made investors wary of the country.

BNamericas caught up with the president of Bolivian state oil company YPFB, Carlos Villegas, to discuss these issues and more on the sidelines of the World Gas Conference.

BNamericas: What is occurring with Bolivia regarding its gas pipeline with Argentina?

Villegas: I am here meeting with Argentina's planning minister Julio de Vido. We haven't signed anything with Argentina yet in terms of a contract. We are going to work hard these next three weeks with Argentina to firm up the contract that exists and solve a few existing issues that have arisen these past few months.

We have technical teams meeting up in [Bolivian city] Santa Cruz with [Argentine state oil firm] Enarsa officials and they are looking at pending issues, including volumes.

We would like to ratify the current pipeline contract, which is for 27.7Mm3 /d. Afterwards, we are going to talk about shoring up transport investments in both Argentine and Bolivian territory.

In three weeks we hope to have an agenda. We will then take the opportunity to talk with Argentina's minister De Vido again.

BNamericas: With the ongoing nationalization process in the oil and gas sector, is YPFB still open to foreign investments?

Villegas: Yes. The model of nationalization that we've chosen is formed by a scenario that allows both public and private investment, which could be national or foreign. Regulations in the country allow both forms of investment. The jurisdiction allows YPFB a business model that gives complete confidence to the private sector. The private sector has the space it needs in Bolivia.

BNamericas: What are these regulations?

Villegas: The laws are clearly established. Fifty percent of all hydrocarbons income is paid to the state. Of the remaining 50%, an amount is paid to the operating companies to cover their costs, and the difference is distributed between YPFB and the operating companies. In this way, operating companies know exactly what their revenues are going to be. This was the law that was established in 2006.

BNamericas: Is the nationalization process complete?

Villegas: Nationalization is complete, practically. YPFB has participation in the entire chain of the hydrocarbons process. So yes, in terms of hydrocarbons, nationalization is complete.

BNamericas: [Spain's] Repsol recently announced plans for Bolivia, can we discuss these?

Villegas: Last month, President [Evo] Morales went to Spain and spoke to Repsol. The company has agreed to invest US$1.6bn over the next five years, and this includes drilling seven wells and expanding plant capacity. This is the contract we have with Repsol.

BNamericas: What about the talk of [Russia's] Gazprom in Bolivia?

Villegas: We have signed a letter of understanding with Gazprom and are currently discussing the creation of a company with them. We are currently negotiating with Gazprom to identify a block. This is all in the very early stages. I spoke to Gazprom CEO Alexey Miller, and we are looking at the possibility of Gazprom expanding operations in the country.

BNamericas: What level of investments in the sector do you expect to see in the next few years?

Villegas: We expect investments to 2015 of US$11.3bn, and this includes all the phases of production, refining, transport, exploration and industrialization. This is our medium-term plan.

BNamericas: And what level of gas capacity do you hope to reach?

Villegas: If my memory serves me, we just announced at the exhibition a production peak of 74Mm3. That is the production peak we'd like to reach by 2015.

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