The gas sector in Bolivia, which was the mainstay of the country’s economic model and the factor that gave it geopolitical importance in the Southern Cone, is at its worst moment as a result of policies that neglected exploration and errors such as having assured in 2019 that a “sea of gas” had been found and that has been denied by the Government of Luis Arce four years later.
Sector analyst Raúl Velásquez, from the Jubilee Foundation, and former Hydrocarbons Minister Álvaro Ríos, in statements to France 24, focused on the area regarding the commotion caused by the denial of the “sea of gas”, which was Touted in January 2019 by the Government of Evo Morales as the “most important” energy discovery in 20 years.
It was the Minister of Economy, Marcelo Montenegro, who surprised days ago by assuring correspondents that an authority from the Evo Morales government “made the president believe” that “we were in a sea of gas.”
“They told him ‘you are in a sea of gas’ and it was a lie and today, obviously, we are paying the piper for not having explored in those years,” Montenegro said in an admission that has sparked controversy over the reasons for the fall of the sector from the expected place it was when the country aspired to be the energy axis of the Southern Cone.
Seen in perspective, the “sea of gas” speech would have sought to calm criticism against Morales or attract more investment for exploration, despite the fact that the company in charge of the operation, Repsol, had been cautious, indicating that no discovery was made. of commercial value after having carried out the deepest drilling in South America reaching almost 8,000 meters in the Boyuy X2 well, in southern Bolivia.
Velásquez: “The sector is going through its most critical moment in 20 years”
But the structural reasons for the decline of the sector, according to Velásquez, lie in the application of a regulatory framework aimed at ensuring that the State has the highest possible income from the gas business with a tax regime that has discouraged companies from investing in exploration for look for more hydrocarbons.
“The sector is going through its most critical moment in the last 20 years,” said Velásquez, after explaining that production has fallen to 38 million cubic meters of gas per day from the 60 million reached in 2015 and that the reserves were in 2017. at barely 10 trillion cubic feet, with no new information since then, despite the fact that the law obliges the state oil company YPFB to make annual certifications.
According to the economist, a series of events and decisions shaped the complicated scenario that the sector is experiencing, despite the fact that at the beginning of the century the country was considered an engine of energy integration, especially due to the reserves it had at the time and its contracts with Brazil and Argentina, currently limited.
Events such as “the gas war” (2003), the referendum on gas (2004), the Hydrocarbons Law (2005) and the nationalization (2006) shaped this statist policy, but forgetting “the sustainability of the sector in the long term “, held.
Without counting production costs, the State keeps up to 82% of the rent from hydrocarbons, leaving 18% for companies, which is equal to the “State having the largest slice of the pie, even sacrificing the cake”, according to the expert.
To capture these rents, in the period 2009-2014 there was an accelerated exploitation of the existing reserves to take advantage of the high cycle of the price of hydrocarbons, “but neglecting an exploration policy that allows those reserves to be replenished.”
According to Velásquez, Bolivia now needs to “make a 180-degree turn in the management of hydrocarbons” with a new law generated in a broad debate in society, since several regions and sectors depend on that income, although he is not sure that the Government of Luis Arce is finally encouraged to face this process.
Ríos: “If we do nothing, we will have to import natural gas”
Former Minister of Hydrocarbons Álvaro Ríos stated that “the main problem” is that the current tax system does not allow remuneration to companies for the massive exploration of hydrocarbons and it is necessary to think, for example, of a tax deferral for five years so that the private sector is encouraged to seek new reserves.
Otherwise, the situation gets more and more complicated. We are going to continue importing more gasoline, more diesel, later we will import LPG (liquefied petroleum gas) and if we do nothing, for a while we will have to import natural gas,” warned Ríos.
The former minister also maintained that a reform to attract new private investment to drill more wells will not mean that the State stops controlling the sector as it does with nationalization, but that incentives are applied to have risk capital, as is also done in countries with strong national oil companies.
A prognosis that Bolivia could end up importing natural gas, its greatest wealth, does not seem unreasonable, since the statistics show how fuel imports are growing, contrary to the decrease in its exports.
According to a recent report from the private Bolivian Institute of Foreign Trade (IBCE), imports of fuels and lubricants from Bolivia stood at just over 4 billion dollars in the first eleven months of 2022, while hydrocarbon exports reached only to 2.8 billion dollars.
2022 was the year of change in this trend since until 2021, Bolivia still exported more energy than it bought.
