Bolivia: Bolivia Will Fulfill Gas Export Contracts With Brazil, Argentina 2011/05/19

SANTA CRUZ, Bolivia - Despite rising demand for natural gas during the Southern Hemisphere winter, Bolivia is prepared to meet all its export commitments to neighboring Brazil and Argentina, Carlos Villegas, the president of the country's state oil and gas company YPFB, said Thursday.

Argentina and Brazil have frequently complained about insufficient natural gas supplies coming from Bolivia, which has struggled to ramp up production since nationalizing the hydrocarbons industry in 2006.

"If Argentina and Brazil ask for the maximum amount under the contracts, we're in conditions to comply with that," Villegas told reporters at an oil-and-gas conference in Santa Cruz. "We have the production capacity to cover domestic and export demand."

Last month, Bolivia said that its proven natural gas reserves had increased by 30% to 13 trillion cubic feet. The new estimate was based on exploratory work done by France's Total SA (TOT) and Tecpetrol, a unit of Argentina's Techint Group.

Domestic demand for natural gas in Bolivia has risen sharply in recent years and has bumped up against the country's export obligations, which are the main source of Bolivia's export revenues and foreign-currency reserves. Bolivia needs between 8.0 million and 8.5 million cubic meters of natural gas a day to satisfy its needs at home, Villegas said.

Bolivia has been meeting the terms of its contract with Argentina and there haven't been any problems lately, Roberto Baratta, deputy secretary at Argentina's Planning Ministry, said.

Villegas said that the contract with Argentina calls for Bolivia to export 7.0 million cubic meters of natural gas a day, but that currently about 7.8 million to 7.9 million cubic meters were being sent on a daily basis.

"We're fulfilling and will continue to fulfill the commitments to Argentina," he said.

The contract calls for Bolivia to increase natural-gas exports to its southern neighbor to 11 million cubic meters a day next year, then incrementally raise that amount until it reaches 27.7 million cubic meters a day, he said.

Transportation capacity is being fully utilized right now, Villegas said. A new pipeline to carry gas from Bolivia to the north of Argentina that is expected to be inaugurated in June or July should provide some relief, he said.

Bolivia's contract with Brazil calls for a maximum of 30 million cubic meters a day of gas exports.

Brazil is counting on Bolivian gas to play an important role in its power generation plans in the south of the country.

The receipt of 31.5 million cubic meters a day "is key to our trade and investment plans," said Antonio Eduardo Monteiro de Castro, head of gas and energy marketing and sales at Brazil's state-run oil company Petroleo Brasileiro (PBR, PETR4.BR).

Brazil has enormous natural gas reserves of 417 billion cubic meters and has seen confirmed reserves rise by 90% over the past decade. But demand for gas soars during dry spells as electric utilities run gas turbines to compensate for lower hydroelectric output, he said.

Bolivian gas will be particularly important in the future as Brazil looks to use more gas for industrial processes such as fertilizer production, Monteiro de Castro said