Bolivia lines itself up to rescue energy-starved California

Jul 18, 2001 02:00 AM

It's a grandiose vision: Build a $ 5 bn, 5,000-mile (8,000 km) natural gas route using ocean tankers and pipelines through three Latin American countries -- and rescue energy-starved California. Bolivia may be South America's poorest nation, but it has lined up major energy companies to help foot the bill for the daunting venture. If successful, the project would be a novel example of how world energy markets are bringing together business and government in previously unheard of ways.
Three-quarters of Bolivia's 8 mm people are poor. Farmers in the high plains use oxen to plough fields. Hunters still use bows and arrows to catch dinner in the jungle. Rural Indians live without electricity or potable water.
But in less than four years, Bolivia's proven natural gas reserves have blossomed from 6.6 tcf to 46.8 t (190 cm to 1.33 t), attracting the attention of British Petroleum, British Gas and Spanish- and Argentine-owned YPF. At the same time, Bolivia's army, backed by the United States, has wiped out hundreds of thousands of acres (hectares) of coca. Its economy devastated, Bolivia sorely needs alternative exports.

It once took an enormous leap of faith to invest in a project that laid pipe across a region with a long history of strife. But the global economy has brought together buyers and sellers in new, efficient ways -- and recent reforms in Bolivia have caught the attention of global energy players.
Bolivia's industries were nationalized until 1985, but the government has slowly privatised its economy and opened its borders to foreigners. Foreign investment has risen from $ 128 mm in 1993 to $ 760 mm in 2000.
"We decided to enter the era of globalisation," said Claudio Mansilla, Bolivia's minister of foreign commerce. "In that moment, doors started opening." Bolivia was the first South American nation to export gas, constructing a pipeline to Argentina some 20 years ago. It is a major exporter to Brazil.
Then came the energy crisis in California, and business and government leaders jumped into action. Bolivia needs only 20 % of its natural gas reserves for domestic energy consumption and existing exports, meaning 80 % has no home. Peru and Argentina also are seeking to boost gas exports, but both have higher domestic consumption and fewer reserves than Bolivia.
"You have the market, and the supplier," said Herbert Muller, an economist in La Paz who is advising the energy companies for the project. "The rest will work itself out." The hurdles are staggering. Landlocked by the Andes, Bolivia envisions a complex land-and-sea route linking either Peru or Chile with Mexico and the United States.

Gas extracted from Bolivia's sunny region of Tarija, which shares a border with Argentina, would be piped west across the rugged Andes until reaching a Pacific Coast port town -- either Mejillones in Chile, or Ilo in Peru. A plant at the port would turn the gas into a liquid that is put on a ship headed for Mexico. On either the Pacific or Gulf side of Baja California in Mexico, a re-gasification plant would revert the liquid back to gas, then either send it in a pipeline north to California, or use it to generate electricity that would then travel through power lines to the energy-starved state.
Bolivia is not the only one looking to fulfil California's needs. As Bill Wood, chief natural gas forecaster for the California Energy Commission puts it, "everybody's flocking to California to sell gas." Wood, who has been contacted by would-be gas providers as far away as New Guinea, has not yet heard from Bolivia. He believes they have yet to contact any government officials there. Companies here say they have contacted El Paso in Texas, an energy company thinking of building a facility to convert liquid to gas in Mexico near the California border.

Source: AP via Newspage
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