Global Insight Perspective | |
Significance | In a press conference, President Evo Morales has said that US$1.266-billion-worth of investment is expected in 2008, but this figure does not include investments planned by the Brazilian state oil company Petrobras and several other accords, which means that total investments could reach US$1.5 billion. |
Implications | The new investments planned by YPFB and foreign companies will help to raise production levels in order to ensure that there are sufficient supplies to meet demand from the domestic and export markets. |
Outlook | Although Bolivia's gas-supply outlook is improving, several years of low investment mean that gas supplies in 2008 will remain tight. |
Bolivia Expects New Investment, But Supplies Remain Tight
President Evo Morales yesterday announced that the 12 foreign companies that operate in Bolivia and the state oil company YPFB are planning to invest US$1.266 billion in the hydrocarbons sector in 2008, according to the state news agency ABI. Out of the total, YPFB is planning to invest over US$182 million in the two refineries it took over from the Brazilian state oil company Petrobras last year. A further US$17.8 million will be invested in the expansion and construction of pipelines and foreign oil companies have committed themselves to US$967 million-worth of investment. However, the report stated that the projected investments do not include additional investments planned by Petrobras (US$200 million in 2008), by the Spanish-Argentine oil company Repsol-YPF, by a mixed company comprising YPFB and the Venezuelan state oil company PDVSA in exploration in the department of La Paz, or under agreements signed with Iran (see Bolivia: 19 December 2007: Petrobras's Plans for New Investments Affirm Brazil's Continued Reliance on Bolivian Gas).
Despite the expectation of higher investments in the year ahead, the Ministry of Hydrocarbons Carlos Villegas acknowledged that Bolivia may have difficulties in complying with its export commitments to Brazil and Argentina during 2008. A meeting has been called with Brazil and Argentina to assess the gas-supply situation. Villegas projected that production would average 42 mmcm/d by the end of the year, insufficient fully to cover contracted volumes with its neighbours. Current gas production stands at around 40 mmcm/d, while combined domestic and export demand stands at 46 mmcm/d. Villegas stated that Bolivia would comply with a contract with Petrobras for up to 31mmcm/d of gas via the Bolivia-Brazil pipeline. However, he indicated that contracts with the Cuiaba power plant in Brazil and the Comgas distributor will not be fulfilled in 2008, following an agreement reached with Brazil's President Luiz Inácio Lula da Silva. Argentina may also once again not receive as much gas as it is entitled too, threatening to compound that country's own domestic supply problems.
Outlook and Implications
Bolivia's gas production has peaked, and new investments are needed in order to ensure that there is sufficient gas to meet demand for exports as well as the needs of the domestic market. Insufficient supplies meant that in 2007 gas supplies to Argentina and the Cuiaba power plant in Brazil were temporarily restricted in order to enable increased volumes of gas to be transported to Brazil via the main Bolivia-Brazil pipeline.
The announcement of new investments will be welcome as they should result in increased production volumes in the coming years. There has already been an increase in exploration activity following the signing of new contracts with foreign oil companies. Pluspetrol has just announced the discovery of a new field and Repsol-YPF announced an important discovery last month (see Bolivia: 10 December 2007: Repsol Announces Gas Discovery in Bolivia). The additional gas reserves will also support an increase in production and exports in the years ahead. However, it will take time for new production to come onstream and in the short-term the consequences of several years of low investment as a result of political instability and the nationalisation of the gas sector will be reflected in tight supplies.