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SOUTH AMERICAN ENERGY MARKETS WEEKLY ROUNDUP (July 10-17): Bolivia’s Transredes nationalization raises a lot of questions

July 10, 2009

South American Energy Markets (SAEM) now publishes a weekly roundup of the top-five stories including analysis affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Weekly Roundup appears on Mondays and is published by noon London time.

Monday, June 15, 2009

BOLIVIA/TRANSREDES NATIONALIZATION

Transredes president, Gildo Angulo, gave stinging testimony to the senate criticizing the government’s nationalization of the transporter (today YPFB-Transporte), writes hidrocarburosbolivia.com. YPFB President Carlos Villegas, who sacked Angulo for claiming that the state had paid an overprice of $200 million to purchase Shell’s and Ashmore Energy International’s (AEI) stake in TR Holdings, did not bother to appear in the opposition-controlled Senate with Hydrocarbons Minister Oscar Coca to answer Angulo’s charges. In the latest round of accusations, Angulo said that the state had paid about $1 billion for TR Holdings.The official price that YPFB reported to pay Shell and AEI was $241.155 million each.

COMMENT: Many times one has to look behind the news to see which are the real culprits at play. One of these could be power battles between the different players controlling the sector. One of the salvos that Angulo hurled at the Senate hearing was at Villegas, who he claimed was a moral enemy of his predecessor Santos Ramirez, who resigned in disgrace at the end of January due to corruption allegations that involved the murder of an energy executive. Another interesting question that brings to light is why is there such a stir about the Transredes nationalization while very little has been said about the nationalization of Chaco, Andina and CLHB? Probably the secret lies with AEI, the UK investment fund that moves in mysterious ways in the region.

Taking into account that there are discrepancies over how much the state actually paid for the nationalization of a company such as Transredes, it points to a lack of transparency. Whose figures should we believe? For the time being we should take all these accusations and counter-accusations with a grain of salt? Why? Because we have certainly not heard the last of Transredes’ nationalization.

BRAZIL/GAS CONSUMPTION

Brazilian gas consumption during the month of May rose by 26.5% to 41.562 million cu m/day compared with 32.855 million cu m/day in the previous month, according to Brazilian gas association Abegas. While gas usage was boosted by a rise in thermal power consumption, up 160.97% to 10.457 million cu m/day from 4.007 million cu m/day, these figures are still far behind consumption in May 2008, when it stood at 49.771 million cu m/day, a 16.49% reduction.

COMMENT: While consumption is picked up in May compared with the previous month, some analysts believe that it is still too early to talk about an economic recovery and higher consumption. Higher thermal gas output could be attributable to the winter months and the fact that Brazil’s gas-purchase agreement requires a take-or-pay clause of 24 million cu m/day. After purchasing 28-31 million cu m/day from Bolivia during July 1-3, gas exports to Brazil have fallen to 26 million cu m/day between July 4 and July 8.

BOLIVIA-ARGENTINA/LPG

Owing to a shortage of LPG cylinders in winter, Bolivia has agreed with Argentina to supply it with 30-40 tonnes of LPG (3,000-6,000 cylinders/day), reports state-owned news agency ABI. Apart from a shortage of LPG cylinders, Bolivia is also suffering from a lack of diesel and gasoline at the pumps.  Prior to the announcement to import LPG from Argentina, state-owned energy company said that it would import gasoline from Chile.

Below is a speech by Vice President Alvaro Garcia Linera, who blames the shortages of LPG on people who contraband it outside of the country.

COMMENT: This is one of the great mysteries of Bolivia: It has the second-biggest gas reserves in South America after Venezuela but is suffering an energy crisis. Projects such as building a gas separation plant with PdVSA of Venezuela and Enarsa of Argentina are far behind schedule aiming to raise LPG output. LPG has been called “the gas of the poor” since it is used by low-income homes at kitchens to heat food. Bolivia uses 113,000 LPG cylinders/day, with up to 50,000 being used in La Paz and 30,000 in Santa Cruz.

BOLIVIA/LNG

Hydrocarbons minister, Oscar Coca, was quoted as saying in La Paz daily La Razon that building a liquefaction plant in Bolivia is still an option for the country. “I want to point out that all the countries are advancing in this process [to build liquefaction/regasification capacity] and the aim is to move ahead in this process,” he said.

COMMENT: Even though Hydrocarbons Minister Coca says that Bolivia is also seeking to enter the liquefaction era, Bolivia’s chances were dashed in 2003 when the Repsol-led Pacific LNG project was indefinitely shelved due to protests against plans to build the liquefaction plant in northern Chile. At the time, riots forced President Gonzalo Sanchez de Lozada to flee the country to Miami. While Bolivia was headed to become the first South American nation to export LNG, it is today one of the last.

VENEZUELA/PdVSA INVESTMENT PLAN

PdVSA head and minister of energy and petroleum, Rafael Ramirez, reiterated that the state-owned energy company’s plans to invest a record $14 billion this year were on track despite an abrupt fall in global crude prices from last year, according to a statement by PdVSA. “The investments have not stopped,” he said.  Meanwhile, PdVSA is reported to have told $1.418 billion worth of debt (Petrobono 2011), or about half offered by the company, writes Caracas-based El Universal.

COMMENT: Politicians and markets sometimes do not speak the same language when it comes to countries such as Venezuela. Owing to an abrupt fall in global oil prices, financing PdVSA’s ambitious oil and gas projects have been put into doubt. The government is planning to issue on July 20 new debt to finance PdVSA’s projects. The company had a debt of $7.556 billion in the end of 2008 compared with $3.111 billion in 2007.

These briefs can be reprinted as long as the source is cited.

If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.

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