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Bolivia pays the price for following Chavez


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It seems that Evo Morales greatly under-estimated his brotherhood with chavez who seems to be all talk and no action on his prior international pledges of support.





Bolivia's stagnant natural gas sector affects Southern Cone

Posted on Mon, Apr. 07, 2008






CARACAS -- Venezuela's state oil company has failed to fulfill promises to make badly needed investments in Bolivia's natural gas fields.


This has contributed to a lack of new production under Bolivian President Evo Morales, which in turn, has had huge ramifications throughout the Southern Cone. Brazil, Argentina and Chile -- which all were depending on more gas from Bolivia for their growing economies -- find themselves facing energy shortages that seem likely to pinch consumers, businesses and economic growth during South America's upcoming winter months.


By no means is Venezuela's PDVSA solely to blame for the energy crunch.


Political turbulence in the years preceding Morales' 2006 inauguration combined with his nationalization policy have led to Bolivia's foreign gas companies shaving investments to the bare minimum, said Carlos Alberto López, a former secretary of energy who now consults for the gas companies.


López said investment in gas was about $175 million in 2007, down from $442 million in 2002 and $1.1 billion in 1998 when Bolivia was aggressively seeking foreign investors.




Meanwhile, neighboring Argentina under President Néstor Kirchner had been keeping home heating bills low in recent years, ''which has acted as a disincentive to investment,'' said Daniel Kerner, an energy analyst with the Eurasia Group, a New York-based consulting firm.


But PDVSA's role is striking because Morales and Venezuelan President Hugo Chávez have forged a close alliance. Chávez has showered Bolivia with millions of dollars for new schools, health clinics and roads throughout the country.


Chávez promised even more money to tap into Bolivia's natural gas reserves, the second-biggest in Latin America after Venezuela's.


He and Morales signed a comprehensive agreement in May 2006 -- four months after Morales took office and three weeks after Morales ''nationalized'' the gas industry by sharply raising taxes and forcing the companies to sign new contracts.


Chávez said that Venezuela would invest $500 million immediately and another $1.5 billion in the coming years.


PDVSA was supposed to find new gas, train 200 Bolivian engineers and build both a gas processing plant and a petrochemical plant.


''Bolivia and Venezuela are embracing forever, taking the path of equality and justice,'' Chávez said exuberantly, with Morales at his side.


With little progress evident, Venezuela and Bolivia held another ballyhooed ceremony in December 2006, announcing again that they would form a joint venture to produce more gas.


But PDVSA action in Bolivia has consisted of little more than opening an office in La Paz.


''We have seen no specific investment plans that will lead to increased production in the near future,'' said Sophie Aldebert, a Brazil-based analyst for Cambridge Energy Research Associates, a consulting firm.


She suggested that PDVSA is not up for the task, noting that Venezuela has huge untapped gas reserves of its own and that Venezuela's oil production has been falling.


In one of the most specific statements to date, Bolivian Energy Minister Carlos Villegas said in January that PDVSA was studying oil deposits in nearby La Paz.


PDVSA in Bolivia did not respond to an interview request.




Iran and the Russian energy company Gazprom have also made grand announcements within the past year that they will help Bolivia find more gas, but nothing concrete has developed.


Brazilian President Luis Inácio Lula da Silva also announced a major investment by Petrobras, the private-public energy company, but nothing has developed yet.


''Announcements come cheap,'' said a frustrated López.


Villegas has said that Bolivia will produce an average of 42 million cubic meters of gas per day in 2008, with most of it (30 million cubic meters per day) destined for Brazil.


But Brazil had wanted even more, especially for greater Sao Paulo, which might face electricity rationing in May and June because of shortages.


Argentina also badly needs more gas, for itself and to fulfill contracts it has to send gas to Chile.


But Bolivia has been unable to consistently meet its current contract with Argentina to provide 7.7 million cubic meters per day. As a result, Argentina, too, may have to endure rationing in the coming months.


Kirchner and his successor, wife Cristina Fernández, have responded by cutting off most gas exports to Chile, which may be facing the most severe energy shortages of all. A drought is wreaking havoc on hydro-electric production.


Morales and Kirchner had announced a medium-term solution to the gas problem: construction of a $1.6 billion pipeline from Bolivia to Argentina by 2010 that would quadruple Bolivia's exports to Argentina.


But the two countries have delayed plans this year, with the source of financing still unidentified and Bolivia unable to produce the required additional gas. With no work on the pipeline yet underway, analysts like Lopez doubt it will ever become a reality.


''I think they'll just expand the existing pipeline,'' López said. ``Argentina is openly committing to LNG.''


In doing so, Argentina is following the lead of Brazil and Chile, which -- having concluded that Bolivia is not a reliable source -- are now spending hundreds of millions of dollars to build terminals that would allow them to import liquefied natural gas from Nigeria, Indonesia, Malaysia, Trinidad and elsewhere.

Edited by Human
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