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Bolivia seeks to index gas exports to LNG

27 Nov 2017 18:05 GMT
Bolivia seeks to index gas exports to LNG

Lima, 27 November (Argus) — Bolivia is seeking to index future pipeline natural gas exports to LNG rather than fuel oil, a proposal that could be implemented in the renewal of a critical supply contract with Brazil.

Negotiations are underway to renew the Brazilian contract ahead of its expiry in 2019.

"Our competitor today is LNG (and) the Bolivian proposal is for future contracts to be indexed to LNG and not oil," Bolivian hydrocarbons minister Luis Sanchez told state news agency ABI.

Bolivian state-owned YPFB´s contract with Brazil´s state-controlled Petrobras was originally signed more than a decade before Brazil started importing LNG. Petrobras currently has two active LNG terminals, and the private sector is developing at least two others. Brazil is also building up its domestic gas industry with new regulations and investment terms, partly based on extensive sub-salt deposits offshore.

There was no immediate comment from Petrobras on the Bolivian proposal to index future supply to LNG.

Bolivia exported 24.8mn m3/d of gas to Brazil in the year through September, according to Bolivia's national hydrocarbons agency.

The landlocked country also exports pipeline gas to Argentina under a contract that expires in 2027. Bolivia exported 19.3mn m3/d to Argentina in the year through September. Like Brazil, Argentina started importing LNG in the late 2000s, and is developing its extensive domestic gas deposits centered on the Vaca Muerta shale formation.

Bolivia is under pressure to sustain its gas exports which are the largest source of government revenue. An earlier plan for Bolivian president Evo Morales to travel to Brasilia to meet today with Brazilian president Michel Temer to discuss gas supply was postponed following Temer´s weekend surgery.

Sanchez said Bolivia's gas would remain competitive in the Argentinian and Brazilian markets despite rising gas production in both markets. "We are much more competitive than the Vaca Muerta project in Argentina and sub-salt in Brazil," he said.

The minister said that the price of Bolivian gas is $4-$5/mn Btu, compared with almost $9/mn Btu for Vaca Muerta and sub-salt gas.

Sanchez said Bolivia was encouraged by the conclusions of the 12-nation Gas Exporting Countries Forum (GECF) that wrapped up its fourth summit on 24 November in Bolivia's eastern city of Santa Cruz.

An 11-point final declaration focused on economic issues related to gas use, including the need to "attract investments in the natural gas value chain."

Against the high-profile backdrop of the forum, YPFB signed contracts with Petrobras, BP-controlled Pan American Energy, Spain's Repsol and Shell to invest a total of $1.6bn on three exploration blocks. It also signed six agreements with Russia's Gazprom, including two for the development and marketing of LNG and CNG in the domestic market.

The forum designated Bolivia as the group´s regional headquarters for Latin America and the Caribbean. Sanchez said the office would "gather statistical information to allow for better planning of natural gas supply and demand in the regional market."

Trinidad and Tobago and Venezuela are also members of the GECF, while Peru is an observer. Trinidad and Peru are the region´s sole LNG exporters.

Other countries in the GECF include Algeria, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia and the UAE.