Bolivia Makes Aggressive Energy Expansion Plans

August 26, 2010

Energy Minister, Luis Fernando Vincent, recently stated that Bolivia is planning over the next five years to transfer from its current energy production status of resource extraction & the exporting of raw resources, to an industrialized nation exporting refined products such as gas derivatives like fertilizers.

The Energy Minister also stressed that they were exploring new policies to increase exploration.

After a boom of private investment in the 1990’s, large reserves of natural gas were discovered in Bolivia.  One of the poorest countries in South America, Bolivia was able to assist their economy by signing sizable natural gas supply contracts with Argentina and Brazil.

The low-income Bolivian citizens rely solely on liquefied propane gas (LPG) bottles for their house as well as to power their public transportation vehicles.  Although Bolivia is second in natural gas reserves only to Venezuela, the country has to regularly import refined oil derivatives such as gasoline, diesel fuel, and LPG.

In May of 2006, President Morales nationalized all of Bolivia’s natural gas & oil assets.  Critics are speculating that the energy industry has not been growing due to a lack of foreign investment, consequently due to the government’s lack of efficiency.

Bolivia’s neighbors, on the other hand, are improving their own energy security by reducing their dependence upon Bolivian natural gas, by investigating other sources like imported liquefied natural gas (LNG).

As Bolivia’s proven natural gas reserves decline, the need for exploration is of high concern.  Critics believe that the reduced reserves are due to a lack of investment, not a lack of potential natural gas reserves.

Mr. Vincenti stated that there were numerous investment offers that were being evaluated, as well as a commitment from President Morales to provide legal support to private companies meeting their investment plans.

One of Bolivia’s major investors, Petrobas, of Brazil, has reported an $11.5 billion budget for total foreign investment over the next five years.  Bolivia is surely going to get a piece.  In addition, Bolivia has nurtured relationships with Russia’s Gazprom and Sinopec, of China, who are both reported to be making large investments in natural gas.

However, critics of the Bolivia government feel that the difficulty resides with the high percentage of royalties that the government is requiring.  Investors need a better return on their investment.