By E. Dunphy, ACA
Natural gas has played a key role in Bolivia’s economy, notably over the last 15 years where production has more than doubled from 2003 levels to reach 1654mmscf/d in 2017. However, under-investment in exploration now sees the country boasting a reserves life of a modest 15 years according to BP data, while YPFB indicates that current reserves are only sufficient to maintain production out to 2024 should new reserves not be discovered and developed. Increased investment in exploration is thus crucial to securing the future of Bolivia’s natural gas industry, a fact the Bolivian government appears to be attuned to.
Numerous exploration agreements signed but more needs to be done
While the gas sector is state-controlled, YPFB has always been free to establish partnerships with international companies and November 2017 saw exploration and production agreements signed with Repsol, Petrobras and Shell for investments totalling approximately $US1.6 billion. The focus of exploration will be on the Iniguazu, San Telmo and Astillero gas blocks, with President Morales stating that these projects could add c.21mscf/d to production, with early production coming on-line as early as 2021.
Elsewhere, in 2018 Repsol announced it would invest $US500million in exploration and development of Iniguazu and Boyuy area over the next four years, while YPFB pledged some $US465million to explore the Itacaray, Azero, Caipipendi, Aguarague Norte, Inau, Sauce Mayu and Ingre blocks.
Gazprom also announced that it would begin exploration work at the Vitiacua field in 2019 following an agreement with YPFB in June 2018. This will see Gazprom invest $US1.2billion in an area estimated to hold up to 2.17TCF of gas.
Whilst the recent flurry of activity is certainly promising, Prysma E&T consultants estimate that Bolivia needs to invest between $US5billion and $US6.2billion over the next 10 years to ensure that domestic consumption and export commitments are met.
Export markets at play
Meanwhile, 2019 will play a crucial role in determining future hydrocarbons policy, with Bolivia’s 20 year Gas Supply Agreement (GSA) with Brazil up for renewal. Whilst both Bolivia and Brazil have officially stated in the past their reciprocal intention to continue their gas supply relationship, the new Brazilian president elected on 28 October 2018 supports views radically opposed to those of president Evo Morales. As such, expectations are now that YPFB will have to compete as a company instead of relying on negotiations between states. With Brazil’s domestic production increasing, there is a risk that off-take volumes could be significantly reduced in any future GSA.
Efforts are already being made to secure better pricing and increased volumes with its other major gas importer Argentina, with the latter agreeing to increase the price it pays for Bolivian gas to $US6.46/mmbtu (from $US6/mmbtu) in July 2018. However, as with Brazil, Argentina’s domestic production is set to increase in the long term hence this may not prove to be a long-term sustainable solution.
Bolivia’s long-held ambition to gain access to the Pacific Ocean via Chile, thereby establishing itself as an energy hub was recently quashed when in October 2018 the World Court ruled against Bolivia’s request that Chile must negotiate over granting it sovereign access to the Pacific Ocean. This leaves the more expensive export routes via Peru’s Southern Peru pipeline and via the port of Montevideo in Uruguay. Whilst vetoed by the Pacific LNG consortium (comprising Repsol, BG and BP) in 2004 as being economically unviable, in the absence of an agreement with Chile, this may prove to be Bolivia’s only solution to accessing new, international markets for its gas.