What Does Bolivia’s ‘Megadiscovery’ of Natural Gas Mean?

While Bolivian President Evo Morales’ government said last month that it had discovered “an ocean of gas,” it is impossible to know whether the well has commercial gas without production tests.

Question: Bolivian Hydrocarbons Minister Luis Sánchez recently announced that the government had discovered “an ocean of gas” at a depth of 7,640 meters in its Subandino Sur zone, calling the “megadiscovery” the most important finding for the country in the last 20 years. A few days earlier, Sánchez told reporters that he and his Peruvian counterpart had agreed to discuss the possibility of building a pipeline to transport natural gas from Bolivia to Peru, from where Bolivian President Evo Morales has wanted to export liquefied natural gas. How significant is the latest gas discovery to Bolivia’s hydrocarbons sector? What would an increase in gas reserves mean for the country’s economy? How likely is it that Peru and Bolivia will build a pipeline connecting the two countries in the near future, and what implications would such a project have?

Answer: Mauricio Becerra de la Roca Donoso, managing partner at Becerra de la Roca Donoso & Asociados SRL (BDA Abogados):

“Huamampampa, a block of sandstone that is a gas source, was discovered in Margarita, Huacaya, Incahuasi and other fields at depths of between 4,000 and 6,000 meters, but the discovery of Boyui X2 was unprecedented at more than 7,500 meters, which gave the find the name of Huamampampa Kipe (‘deep,’ in Guaraní). According to Carlos Torrico, vice minister of exploration and exploitation of hydrocarbons, the term ‘ocean of gas’ has been used so people understand the magnitude of the discovery. In any case, we must wait for the final results of exploration and drilling of the Boyui well to determine whether commercial gas exists, and how much. According to Torrico, the objective—a depth of 8,000 meters—will be met in late February, after which evaluations and a production test to determine how much the well could produce would be carried out. This will likely occur around April 25, according to the schedule. If the new discovery is to be confirmed and certified, it would be very positive for Bolivia, given that it would significantly increase its reserves, bring more investment to the hydrocarbons sector and provide greater security in current gas export contracts with Brazil and Argentina, as well as the possibility of taking on gas export projects with neighboring countries such as Paraguay and Peru. This could include the possibility of exporting LNG via neighboring countries’ ports. Peru and Bolivia agreed to create a working group in charge of examining the possibilities and requirements for exporting natural gas and LNG to locations in southern Peru, which envisions constructing domiciliary networks and a pipeline from Bolivian territory to the port of Ilo in Peru. In the case that Huamampampa Kipe is confirmed and certified, this would facilitate the concretion of the pipeline project. The strategy would be for YPFB to go from being just an exporter toward being a marketer and distributor in the region, thereby obtaining greater benefits from reaching the final customer.