Mauricio Medinaceli Monrroy
Private Consultant
Oil - Natural Gas - Energy

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Blog.047

Natural Gas Market in Bolivia: 2013

After giving grapefruit juice to my son Santi, he said: "But is healthy, isn't Dad? " Inferring that the awful, sour and bitter taste of the juice should be, in some way, good for health... after that I have my serious concerns about my "good" parenthood. Well, 2013 ended and although in a previous post I promised you I would write this note, some dark ways made me delay the homework, but... here I'm.

Official statistics regarding the hydrocarbons sector in Bolivia don't stop filling the daily headlines about the great performace of the sector, they never cease to surprise us with big numbers and more than one believes that there's no end. But what is behind all this? What are the demand and supply drivers? These and other questions lead me to share some numbers on this subject, I mean, the Bolivian natural gas markets (internal and external) development  in recent years.

What is the main growth factor of natural gas production in Bolivia during recent years? The figure below helps us to answer this question. Was the demand of Brazil (through GSA export project) which explains in a greater degree such growth. This project, developed during the 1974-1999 period for both countries (25 years of work- planting) helped to increase the production (and thus exports) of natural gas at present times. In the other hand, during the last three years was the Argentinean demand who caused the Bolivian natural gas production growth.

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Regarding the the supply side, figure below shows the natural gas production according the main fields in Bolivia. Very easy, San Alberto and Sabalo "feeds" the Brazilian demand and in turn, Margarita/Huacaya production "feeds" the Argentinean demand... and that's it.

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And so my dear reader, don't lose the point: two markets and three fields explains (not entirely, of course) much of the magnificent industry official numbers. With this, of course, I don't want to detract the efforts of other operators to increase production, all I want is to note that despite the official figures appear increasingly fantastic, is not the reality of the entire industry, isolating these three fields and the gas exports, we have a very hard situation: 1) subsidized internal prices; 2) low oil production (useful to obtain diesel oil); 3) an hysterical tax system (with 50% royalties); 4) a difficult legal system where coexist the Hydrocarbons Law of 2005, a new State Constitution and various laws and minor legal instruments which hamper the sector development; 5) environmental problems; 6) complex relationship with indigenous peoples... in short, there are several issues that need attention.

I remember a TV series when I was a child, "El Bien Amado" was called, the argument was about a mail who constructed a cemetery, but because there was no new dead people he hired a "bad guy (pistolero)" to stimulate the cemetery inauguration. The discussion in town (Sucupira) was, of course, whether the mayor's plan would succeed and finally could open the cemetery. At this point I feel that discussions about the Bolivian satellite, the Dakar, etc. deviate us from an important discussion about the long term... that time in which, in one way or another, we all end up living.

Mauricio Medinaceli Monrroy

La Paz, January 14th, 2014

 

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In the Blog section I invite you to read: "The future of Bolivian natural gas exports to Brazil"

 

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