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Bolivia may strangle itself with red tape

June 15, 2007

Brazilian state-owned energy company Petrobras chief executive Sergio Gabrielli reiterated the need for greater investments in Bolivia to keep up with future export commitments.

While Brazil signed a 20-year agreement in 1999 and has the right to purchase up to 30 million cu m/d, the big challenge will be to supply Argentina from 2010 with 27.7 million cu m/d, compared with about 6 million cu m/d now. Another challenge of Bolivian authorities will be to satisfy burgeoning domestic gas demand.

Hydrocarbons association CBH has said that Bolivia needs upstream investments of $3 billion to satisfy future export commitments, with others claiming a higher figure of $3.5 billion.The possible scenario that Bolivia may not be able to meet its export commitments and supply demand at home strikes me a bit like Argentina during 2002-04. During that time, investment had fallen abruptly in Argentina because of a new economic emergency law passed by Congress in January 2002. The government blamed foreign companies for not investing enough and energy majors said that there were insufficient guarantees.

The debate ended abruptly in 2004 when Argentina’s higher economic growth fueled gas
consumption at home, forcing the country to scale back exports to Chile, Uruguay and Brazil.

Will a crisis like in Argentina awaken Bolivia to the reality that investments are needed pronto?

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