Page 15 - LatAmOil Week 21 2020

LatAmOil BOLIVIA LatAmOil
The laws governing Bolivia’s gas sector have not changed since Morales’ departure (Image: YPFB)
Bolivian government urged to reform legislation governing gas sector
TWO partners from the energy practice of Indacochea & Asociados, a law firm based in Santa Cruz, have expressed concern about the future of Bolivia’s natural gas sector.
In an article published by Latin Lawyer, Ricardo Indacochea and Mariana Pereira wrote that Bolivia’s economy was in a precarious posi- tion. This is partly because of the impact that the coronavirus (COVID-19) outbreak and other recent events have had on the gas industry, but it alsostemsfromtheneedforreformofthecoun- try’s legal regime, they said.
“The COVID-19 pandemic could not have come at a worse time for the hydrocarbon industry in Bolivia,” Indacochea and Pereira said. By reducing global demand for energy, the virus has helped to bring crude oil prices down, thereby compounding the effect of other devel- opments such as oversupply and lack of storage space, they noted. This directly affects Bolivia’s economy, partly because gas is the country’s main export and partly because the national oil company (NOC) YPFB bases its gas pricing for- mulae on crude prices, they explained.
Additionally, they said, sluggish energy demand raises the risk that buyers of Bolivian gas will declare force majeure in order to avoid taking delivery of excess fuel. This could lead to costly and time-consuming legal complications, they wrote.
It might also complicate negotiations with YPFB’s Brazilian counterpart Petrobras on options for maintaining the volume of gas ship- ments at the previously agreed level of 14mn cubic metres per day, they added. “The only way out of this unexpected and complicated situa- tion for Bolivia is probably to soften its position
and seek negotiated solutions among the main players,” they said.
At the same time, Indacochea and Pereira commented, the country is still saddled with the legal regime instituted by former President Evo Morales, who fled the country last November. Interim President Jeanine Añez had hoped to hold new elections on May 3 but has been forced to postpone voting because of the pandemic, they noted. “Therefore there is a maintenance of thestatusquo,”theysaid.
This is a problem, they argued, not just because it creates uncertainty but also because it preserves existing arrangements that do not favour outside investment. For example, they noted, foreign firms have refrained from mak- ing major commitments to Bolivian projects ever since Morales nationalised the energy sec- tor, owing to concerns about the security of their investments.
“[Another] example of this approach was Bolivia’s denouncement of practically all the bilateral treaties of reciprocal protection of investments that it had agreed and executed with the biggest countries in the world,” they added. “This left investors at the mercy of the Bolivian constitution, which does not allow international arbitration in cases related to non-renewable resources.”
The partners ended by issuing a call for reform. “We hope that the much-needed struc- tural changes in the sector’s regulations are made sooner rather than later, creating a healthy busi- nessenvironmentagain,”theysaid.“Thiswould allow Bolivia to resume its role as a valuable player in the global energy and hydrocarbons i n d u s t r y. " ™
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