# Presentation: 164072

## Natural Gas Trade – Bolivia

- Greg Priddy
- June 2004
- South Asian Regional Initiative – Energy
- Kathmandu, Nepal

## Rationale for Imports - Argentina

- Even though Argentina is a natural gas exporter, its most of its reserves are located far from major domestic markets.
- Bolivia has reserves located near the border which are more economical to supply some markets in northern Argentina.

## Rationale for Imports - Brazil

- Brazil has a large population and rapidly growing demand.
- Brazil’s natural gas reserves are located some distance from the Sao Paulo market, with Bolivian reserves closer.

## Rationale for Exports - Bolivia

- Bolivia has over 24 Tcf of proven reserves, according to very conservative government estimates.
- Independent analysts contracted by the Bolivian government have assessed “probable” reserves at 55 Tcf.
- Bolivia has a relatively small population compared to its neighbors, and low domestic demand of less than 40 Bcf per year.

## Obstacles to Trade

- There is a generalized resistance to increasing exports on the grounds that natural gas should be reserved for domestic development.
- Bolivia could be a source of imports into Chile, but political barriers prevent energy trade with Chile.  LNG options would require a terminal in either Chile or Peru, with Chile the more economical option.

## Bolivian Exports to Argentina

- Agreement signed in 1972 for exports over a 20-year period.
- Extended under short-term contracts until 1999, when Bolivia shifted to exports to Brazil.
- Resumed in 2002, but only in very small volumes.  Essentially “border trade” in areas not served by Argentine pipeline network.  Minor upgrades to this network planned by 2006, but still only 10 MMcf/d.

## Bolivian Exports to Brazil

- Gas supply agreement signed in 1997.  Originally envisaged supplies rising to 1.1 Bcf/d by 2004.
- Exports began in 1999, with completion of the Rio Grande-Sao Paulo-Porto Alegre pipeline, which at 2,000 miles is the longest in South America.
- A second pipeline came onstream in 2002, which extends to Cuiaba in Brazil, with a current capacity of 99 MMcf/d.

## Bolivian Exports to Brazil

- Rio Grande-Sao Paulo-Porto Alegre Pipeline

## Bolivian Exports to Brazil – cont’d

- Actual exports into the Sao Paulo and Porto Alegre markets have been much lower than the pipeline capacity, as expected demand growth has failed to materialize.
- Brazil is pushing for a renegotiation of pricing.
- New natural gas finds in Brazil’s Santos Basin have somewhat weakened the case for imports from Bolivia.

## Santos Basin – Competing Brazilian Reserves

## Liquefied Natural Gas (LNG) Options

- Pacific LNG project – backed by BP, BG, and Repsol-YPF.
- Alternate pipeline routes through Peru or Chile.  Chilean route is poltically problematic.  Peru route is much more expensive.
- Project stalled after events of late 2003 / protests against natural gas exports through Chile.

## Benefits of Trade

- Allowed Bolivia to monetize natural gas through sales to Argentina from 1972-1999, and from 2002 onward.
- Allowed expansion of natural gas usage in southern coastal areas of Brazil.
- May eventually allow Bolivia to monetize natural gas through exporting to an LNG terminal, but this remains in doubt.

## Stranded Gas?

- Export options all face challenges.
- Exports to Argentina are small.
- With increased reserves, Bolivia would have to undercut domestic producers on delivered prices to compete in Brazil.
- While there is interest in LNG, there is plenty of natural gas elsewhere which could be developed without encountering the political problems arising from the Bolivia-Chile territorial issue.