Bolivia cuts minimum gas supply to Brazil

Bolivia took another hit to its natural gas sector by agreeing to a reduction in the minimum contractual volume of pipeline exports to neighboring Brazil.

Bolivia's state-owned YPFB announced that it accepted a request from Brazil's state-controlled Petrobras to lower the minimum supply to 10mn m3/d.

The two parties had reached agreement in March setting the minimum at 14mn m3/d and the maximum at 20mn m3/d. At the time, YPFB said its goal was to increase the volume over time.

Since then, Petrobras never reached the minimum level and in early June it asked to invoke a force majeure clause lowering the amount. It imported 13.9mn m3/d in March, 10.7mn m3/d in April and 11.6mn m3/d in May, according to YPFB.

YPFB blamed the coronavirus pandemic for the decision. "In light of the extraordinary situation we face, we approved the force majeure requested by Petrobras because of Covid-19," the company said in a note.

Prior to the March agreement, the YPFB-Petrobras supply contract included a minimum of 24mn m3/d and a maximum of 30mn m3/d.

In addition to falling gas demand in Brazil because of the pandemic, Bolivian gas has also increasingly come under pressure from imported LNG. The average LNG price in Brazil reached $3.63/mn Btu in March, compared to an average prices of $7.94/mn Btu for gas imported from Bolivia, according to Brazil's monthly gas report. In March, the most recent month with available date, Brazil LNG send-out jumped by 30pc year on year to 13.8mn m3/d, the most since August 2019, even as thermoelectric generation fell.

Argentina outlet

Bolivia also exports pipeline gas to Argentina and volumes have been increasing as the southern cone winter sets in.

Exports to Argentina averaged 15.7mn m3/d in May, up from 10.5mn m3/d the previous month. YPFB announced on 10 June that exports to Argentina for this month would be 18mn m3/d. Exports to Argentina averaged close to 20mn m3/d last year.

Bolivia's domestic gas demand in May was 7.2mn m3/d.

Gas production has averaged below 40mn m3/d since the pandemic hit Bolivia in March. The highest monthly total this year was 42mn m3/d recorded in February. It was 52mn m3/d a year earlier.

By Lucien Chauvin