Bolivia achieves historic gas price with Argentina

Friday, February 15, 2019

This Thursday, Bolivia and Argentina signed an Addendum to the Export Contract for natural gas. The Addenda will increase the export price of gas from 10 million cubic meters per day (MMmcd), which allows generating higher revenues for the country, having a nomination and stable production, which translates into better care of the fields and productivity.

The president of Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), Óscar Barriga and the vice-president of the company Integración Energética Argentina SA (IEASA), Luis Pintos, signed an addendum to the Exportation Agreement of Natural Gas to the neighboring country, improving the prices of energy commercialization from a volume of 10 MMmcd.

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This addendum will enter into force and apply this management, and among the modifications is considered two seasons: one during the seven months of summer and another for the five months of winter, each with better prices from 10 MMmcd.

The impacts generated by the subscription of the addendum to the gas sales contract to Argentina translates into a double benefit: one from the technical / operational point of view and another economic one.

From the technical / operative point of view, it allows the stability of nominations, having as consequence a stability in the production of the fields and allows to realize a projection and planning of efficient and effective way on the operations in the systems of production and transport; likewise, the addendum allows to stabilize the production of liquids with the consequent stability in the refining and commercialization of fuels for the domestic market. Another benefit is the efficient and safe operation of gas conditioning plants.

Stable natural gas nominations and deliveries also allow all gas wells to produce within the framework of good practices in the oil industry, according to the optimal conditions of reservoirs.

Regarding the benefits from the economic point of view, the addendum establishes a better price regime, establishing differentiated prices from a base volume with current prices (according to the formula for calculating the price of gas with prices indexed to the basket of fuels)

For the summer, in the months of January to April, and October to December, there is a base of nomination of 10 million cubic meters per day (MMmcd) at the current price. While for volumes greater than 10 MMmcd the price will increase by 15% (approximately US $ 7.18 per million BTU).

For winter, on the basis of 10MMmcd to 16MMmcd during the months of May and September and up to 18MMmcd during the months of May, June, July and August, in both cases gas deliveries may be up to 20.4 MMmcd, the price is equal to Escobar's LNG price plus the cost of regasification (LNG + 0.8 $ us / MMBTU).

This price regime ensures the generation of greater income for the benefit of the Bolivian State.

This set of benefits adds value to the contract with respect to the current conditions, improving the expectations and having the security of the oil operations in Bolivia, as well as guaranteeing greater revenues for all the beneficiaries of the sale of gas.

In this sense, for example, if we export a volume of 0.19 TCF to the price of the previous contract Bolivia would receive US $ 1,199 million, while with this addendum the country will receive US $ 1,379 million, having an additional income of US $ 180 million , that is to say, that with the same volumes with the addendum Bolivia will receive higher income.

On the other hand the Minister of Hydrocarbons, of Bolivia Luis Alberto Sánchez and the Secretary of Energy of Argentina, Gustavo Lopetegui, signed a Memorandum of Understanding, through which the energy integration between both countries will be deepened, thus YPFB will be able to commercialize natural gas in the Argentine market to final consumers; make investments in Argentine oil fields that are in the stage of development; You can also participate in LNG export projects in Argentina; and in the same way, it will be possible to exchange gas volumes in different markets (SWAP), allowing the use of the remaining capacity of the gas conditioning plants and others.

This YPFB release was published using an automatic translation system.