How Important Is Foreign Investment to Bolivian Energy?

Question:

In June, Bolivian President Evo Morales traveled to Russia, where he met with President Vladimir Putin and received pledges for investments in the Andean nation’s hydrocarbons sector, among others, with Russian gas producer Gazprom committing to invest $1.2 billion in gas exploration and production in Bolivia. How is Bolivia’s gas sector faring this year? Will Russia’s commitment to invest in the South American country’s energy sector give it a meaningful boost? How important is foreign investment to developing Bolivian hydrocarbons, and to what extent is the industry supporting Bolivia’s economy as a whole?

Answer:

Mauricio Becerra de la Roca Donoso

Managing Partner at Becerra de la Roca Donoso & Asociados SRL (BDA Abogados)

During Evo Morales visit to Russia in June 2018, Gazprom has committed to invest US$1.2 billion in exploration and production at the Vitiacua onshore field in southern Bolivia, with the drilling of two exploratory wells, six development wells, adding a total of eight wells, with an expected maximum production of 400 million cubic feet in coming years. According to YPFB the Viticua block in the Chaco oil and gas basin has potential reserves of 2.17 trillion cubic feet.

It is important to note that back in 2016, both Gazprom and Bolivian YPFB already signed and agreement to explore the La Ceiba, Vitiacua and Madidi blocks, hence the recent agreement basically confirms the investment to be made by Gazprom.

Gazprom has presence in Bolivia for over a decade. The company does not operate any gas fields in Bolivia but is partner with Total E&P (project operator), Tecpetrol S.A., and YPFB in developing Ipati and Aquio oil- and gas-bearing blocks. Gazprom and Total E&P also implement a hydrocarbon exploration project in the Azero block.

In order to fulfill the delivery of gas export contracts with Brazil and Argentina, Bolivia needs to attract and consolidate foreign investment in exploration and exploitation of hydrocarbon. The recent decline in production of old gas blocks and current increase of domestic demand of gas which is expected to grow 10 percent per year, easily reaching up to 20 MMm3 per day by year 2020, make this a priority in the energy sector.

The main exploration projects are Boyuy (potential 4 TCFs) and Boicobo (1.13 TCFs), in the Caipependi area South of La Paz. The consortium formed by Repsol, PAE and Shell has signed an agreement with YPFB to extend the term of the contract for the Caipipendi area for up to 15 years (until 2046) and to invest a minimum of 500 million dollars in the next few years.

Moreover, YPFB and Petrobras have signed a contract for San Telmo and Astillero fields announcing an investment of 1200 million dollars with an estimated reserve of 4 TCFs to guarantee extending the gas sales contract with Brazil beyond 2019. This project currently faces challenges from environmentalist locals.

It is very important to consolidate these projects considering that exploration is a long-term undertaking that takes about eleven years to begin producing gas and Bolivia gas demand continues to increase.

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