Peru, Bolivia to meet on gas pipeline, LNG proposal

Energy ministers from Peru and Bolivia plan to meet next week to discuss a binational natural gas pipeline and LNG project.

Landlocked Bolivia is looking for new gas export channels to complement its markets in Brazil and Argentina.

In recent weeks, Bolivian president Evo Morales and other government authorities have been signaling their support for a pipeline from Bolivia to the Peruvian port city of Ilo, in Moquegua state, to export LNG. Peru in 1992 granted Bolivia a 99-year lease over a 17.5km stretch of coastline near Ilo for industrial and port development.

"We need to build a gas pipeline to Ilo. We are working on the detailed engineering and would need to start construction as quickly as possible," Oscar Barriga, chief executive of Bolivia's state-owned oil company YPBF, said on 9 May.

Peruvian president Martin Vizcarra told Argus that Bolivia's pipeline proposal is worth considering.

"This is a project that would correspond to Bolivia, but we would provide all the necessary conditions. While not a Peruvian project, it would benefit us with new investment options," Vizcarra said.

Vizcarra said the ministers from the two countries need to determine if there are synergies between the proposed projects, including Peru's own southern gas pipeline that will eventually move gas from the southern jungle to Ilo. Supply for that pipeline would come from block 88, part of the Argentinian Pluspetrol-led Camisea consortium, as well as Spanish Repsol-operated block 57 and Chinese CNPC-operated block 58, which is currently under development.

The southern pipeline project was awarded in June 2014 a group headed by embattled Brazilian contractor Odebrecht. The Peruvian government voided the contract in January 2017, when Odebrecht could not close financing for the $4bn construction phase. Lima wants to revive the project.

"The (southern gas) pipeline is meant for national development. We are not considering exports, but that does not eliminate the possibility of building the infrastructure with Bolivia," said Vizcarra.

Peru already exports LNG from Pampa Melchorita south of Lima. Peru LNG, led by US firm Hunt Oil, is South America's only export-oriented liquefaction project. A second export facility at Ilo would expand the country's role in the global LNG market.

For Bolivia, the talks with Peru could give the government some leverage in its current gas supply negotiations with Brazil. The current contract for Bolivian gas supply to Brazil expires next year.

In the meantime, Peruvian legislators representing Puno, on the border with Bolivia, submitted legislation 18 May that would allow for imports of Bolivian gas in their state. The legislation argues that Puno's 1.4mn people and its industry, including mines and cement plants, would create sufficient demand to encourage Bolivian authorities to consider building a 250km pipeline between La Paz, Bolivia's administrative capital, and Puno.

Bolivia exported 20.7m m3/d in first quarter 2018 to Argentina, up from 18.7m m3/d during the same period last year. Exports to Brazil in the first quarter averaged 23.2m m3/d, compared to 20.1m m3/d last year. Total national output averaged 56.5m m3/d in the first quarter.