Tough year for Bolivia creates opportunities for LNG exporters

Feb 27, 2009 01:00 AM

by Pietro D. Pitts

A corruption scandal involving Santos Ramirez, former president of Bolivia's state oil company Yacimientos Petroliferos Fiscales Bolivianos (YPFB), has put the spotlight back on Bolivia's problematic hydrocarbon sector. However, it appears that the Bolivian government is adamant about using this case as an example to show what could happen to other upper level officials if they try to make off with funds destined for state coffers.
In the meantime, Bolivia's hydrocarbon sector continues to feel pressure from a number of lingering issues.

Regardless to the noise related to the YPFB corruption scandal, the outlook for Bolivia's hydrocarbon sector remains dismal. I suspect capital flows into Bolivia during the 2009-2010 timeframe will continue to be influenced by the ongoing nationalization process, other political and economic issues, and now, the worldwide financial crisis.
Bolivia's production of natural gas is around 40-41 mm cmpd, although contractual demand remains much higher. LNG prices have pulled back and are at competitive levels compared with Bolivian gas.

In 2008, Trinidad and Tobago sent a LNG tanker to Brazil, taking advantage of a situation possibly created by large price discrepancies between Bolivian gas and LNG sourced from far off locations as well as supply issues with Bolivian gas. Looking ahead, Argentina and Brazil will continue to look to wean themselves off Bolivian gas as widespread uncertainty looms over Bolivia's hydrocarbon sector.
Furthermore, discoveries offshore Brazil have changed the strategy of that country's state oil company, Petrobras, as it will most likely spend more capital and attention tending to development of its natural resources than those abroad.

Within Bolivia, shortages of gasoline, diesel and LPG continue, although government officials claim contraband as the main reason.
Over the short-term two year period (2009-2010) the major issues affecting the Bolivian hydrocarbon sector will not likely be rectified amid a not so pleasant backdrop that includes on-again off-again internal conflicts; a worldwide financial crisis that has reduced global demand for hydrocarbons and rendered credit difficult and expensive; uncertainty regarding the ongoing nationalization process, related contracts, compensation for assets, and stipulated investments; emergence of LNG from Trinidad and Tobago; and a corruption scandal at YPFB.

Pietro Donatello Pitts, is the Editor-in-Chief of Latin Petroleum and its 100 % owned Venezuelan subsidiary, Editores Latin Petroleum. Prior thereto, he was the Associate Vice President of Equity Research at the investment banking firm, Morgan Keegan & Company and prior thereto an Equity Energy Analyst with Jefferies & Company, both in the United States; Market Analyst at Banco Mercantil del Norte (Banorte) in Mexico City, Mexico; and Market Analyst at Casa de Bolsa Banco Santiago in Caracas, Venezuela.

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