Page 5 - LatAmOil Week 42

LatAmOil COMMENTARY LatAmOil

The similarities are hardly surprising. Arce was be aware that the gas sector is facing even more
the main engineer of Morales’ economic policy, challenges now than it did a year ago.
so he played a crucial role in the latter’s domes- Before Morales’ departure, Bolivia was wres-
tic gasification initiatives – and, notably, in the tling with the question of how to keep the indus-
latter’s dealings with Repsol (Spain) and other try afloat at a time when sales to neighbouring
international oil companies (IOCs) that con- countries willing to pay in hard currency were
tinued to invest in Bolivia and co-operate with declining and sales to domestic customers who
state-owned YPFB after the re-nationalisation of paid subsidised below-market prices were ris-
gas fields in 2006. ing. The country’s government was, as noted
Nevertheless, the president-elect will proba- above, committed to domestic gasification pro-
bly not follow the former president’s lead on the grammes. However, it was having some trouble “
rhetorical front. covering its costs, as Brazil and Argentina, the Brazil and
main destinations for Bolivian gas, were phasing
Fewer rhetorical flourishes imports out in a bid to bring their own newly Argentina
Morales saw gas not just as an instrument of discovered reserves into play.
economic policy or as a source of income but As a result of these dynamics, production lev- have even less
also as a means of bringing the country one step els have trended downward over the last eight incentive to
closer to socialism – to an equitable and abun- years and are now settling at about 40mn cubic
dant future. metres per day, or 14.6bn cubic metres per year. import Bolivian
By contrast, the president-elect has taken a (This was down by 33.3% from the average fig-
more moderate tone. In his victory speech on ures of around 60 mcm per day, 21.9 bcm per gas now that the
October 18, he talked about learning from the year, posted less than a decade earlier.)
“mistakes” made during MAS’ last time in power There is little hope of recovery in the near pandemic has hit
and about his desire to “re-orient the process of future. On the one hand, Brazil and Argen- energy demand
change.” tina remain committed to using their own gas
As such, Arce is not likely to harp on the pur- reserves to supply domestic markets that had
ported virtues of socialism in discussions with previously consumed Bolivian gas. On the other
current and potential foreign investors. Instead, hand, because the coronavirus (COVID-19)
he will probably be more than willing to negoti- pandemic has depressed global energy demand,
ate with IOCs that want to continue working in Brazil and Argentina now have even more
Bolivia or establish a foothold there – provided, locally produced gas at hand – and therefore,
of course, that those companies agree to his even less incentive to import Bolivian supplies.
terms on the use of local content, the expansion Under these circumstances, Arce may not be
of domestic gas infrastructure and investment in willing to devote large amounts of time, energy
local communities. or political capital to legal reforms designed to
attract private investors to Bolivian gas at a time
Legal reforms? Probably not yet when the market for that gas has few prospects
At the same time, though, the president-elect for growth. Instead, he may focus on looking for
may not be eager to pursue the type of legal ways to optimise domestic consumption while
reforms that might make Bolivia a more invit- waiting to see what happens to world energy
ing destination for IOCs. That is, he is sure to demand next. ™

Bolivia’s piped gas exports to Brazil have declined (Photo: Veja)

Week 42 22•October•2020 www. NEWSBASE .com P5