Page 5 - LatAmOil Week 45 2019

LatAmOil COMMENTARY LatAmOil
 Moraleshailedtheexpansionofthegasindus- try, calling it evidence that his leftist policies, which drew inspiration from Venezuelan-style socialism, were working. His words resonated with the many Bolivians who benefitted from economic growth during his first two terms in office, and thus gas helped the president to remain popular for quite some time.
This year, though, Morales’ public standing has eroded. He pledged to seek another term as president, even though Bolivia’s constitution limited the number of terms to two. (The pres- ident assumed power after elections in 2006, before the adoption of the constitution, so he has claimed that his first five-year term actually began in 2009, with his second term following in 2014.) The blatant illegality of this move has lent momentum to his opponents.
Nevertheless, Morales was declared the win- ner of the presidential election held on October 20. This victory sparked a wave of protests, with opposition groups claiming that the vote had been marred by fraud and a lack of transparency. The president dismissed the allegations, saying that his critics were receiving support from the US and other parties eager to frustrate his ambi- tions by staging a coup. Even so, he continued to lose popular support – and also the backing of the police and military forces.
He finally changed his tune on November 10, the day after the Organisation of American States (OAS) issued a report showing that there had been “clear manipulation” of votes in the presidential election. The report also described widespread irregularities on the part of Bolivia’s Electoral Commission, including data manip- ulation and forged records. Morales had previ- ously pledged to abide by the results of the OAS investigation, and he responded to the publica- tion of the report by stepping down and leaving the country. He has since continued to insist that he was the victim of a coup.
Morales had no clear successor, since his vice-president and the heads of both chambers of the legislature also resigned on November 10. As a result, Jeanine Áñez Chávez, the sec- ond vice-president of the Senate, was declared interim president on November 12.
Current conditions
So far, Áñez has not spoken publicly about her plans for the gas industry. To be fair, she has had little opportunity to do so, partly because she has not held her post for long and partly because Bolivia is still being rocked by demonstrations. The interim president’s first day in office was marked by widespread street demonstrations in La Paz, with riot police using tear gas to disperse groups of Morales supporters who claim that the election results were legitimate.
In the meantime, Bolivian officials appear to be nervous about the possibility of turmoil spreading to the gas sector. On November 11, YPFB informed Petrobras and the Argentin- ian utility IEASA that it might have to declare force majeure on gas exports. It said it might not be able to meet all of its supply commitments,
since “groups of people” had taken control of the Carrasco gas field. “We do not discount the possibility that other natural gas production and transportation facilities could be taken over,” the NOC said in its letter to IEASA.
Nevertheless, there were no immediate indi- cations that operations were being disrupted. As of November 12, YPFB’s management was still in place. IEASA said on the same day that gas was still arriving in Argentina in the expected amounts, and investors such as Total, Rep- sol, Petrobras and Gazprom (Russia) told the press that their facilities were still functioning normally. (The UK-Dutch super-major Royal Dutch Shell said, though, that its administra- tive offices in La Paz and Santa Cruz had been closed. It also reduced the size of the team work- ing at the Jaguar X6 exploration well and sus- pended civil engineering works on the Yapucaiti exploration project.)
Conditions worsened on November 13. On that day, YPFB said that the Carrasco-Coch- abamba gas line had stopped operating because of a drop in pressure between Villa Tunari and Lima Tambo. The incident disrupted supplies to Cochabamba, La Paz and Oruro, and YPFB crews were unable to reach the affected section of pipe because of roadblocks.
Also on November 13, Argus reported that some YPFB workers were demanding the resignation of Oscar Barrigas, the company’s president, and other members of the senior management team appointed by Morales.
What next?
It is not clear how long this relative quiet in the gas sector will last. Much depends on the politi- cal situation. If Áñez can consolidate her author- ity and quieten the protesters, gas producers will probably be able to continue operating normally.
But if conditions worsen – that is, if demon- strations continue and Morales supporters gain momentum – gas operators could encounter difficulties, including but not limited to the sei- zure of key production facilities. If so, YPFB will surely declare force majeure.
This would probably cause short-term prob- lems in Brazil and Argentina, the main export markets for Bolivian gas. In the longer term, though, the disruption looks less problematic, as Brazil and Argentina were already making plans to phase out imports of Bolivian gas before the elections. Both countries have sizeable unde- veloped gas reserves and are eager to step up domestic production.
In the meantime, YPFB and other gas oper- ators will have to wait and see, just like the rest of Bolivia. ™
Petrobras’ “
past history of exploration in the transfer of rights area may have discouraged some investors
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