The recent Bolivian presidential election has significant implications for the country’s natural gas industry, following a historic defeat for the left-wing Movimiento al Socialismo (MAS). On August 17, 2024, former president Jorge Quiroga and Senator Rodrigo Paz emerged as frontrunners, with their proposals poised to reshape Bolivia’s energy landscape and its relationships with key markets in Argentina and Brazil. As both candidates confront the pressing issue of declining gas production, they must formulate strategies to enhance output and avert a potential crisis in exports over the next decade.
In the election, MAS candidate Eduardo del Castillo garnered only about 3% of the vote, while Quiroga received 27% and Paz, representing a more centrist approach, led with 32%. A runoff election is scheduled for October 19, 2024, marking a pivotal shift away from nearly two decades of MAS governance. The outcome may herald a new chapter in Bolivia’s energy policy and redefine its role in regional gas markets.
Historically, Bolivia’s upstream sector welcomed private investment in the 1990s, allowing major oil and gas companies to contribute to production increases. However, nationalization in 2006 shifted control to YPFB, the state-owned company overseeing reserves and gas commercialization. Since 2014, Bolivia’s natural gas production has been on a downward trajectory, raising concerns that the nation could become a net gas importer within the next decade.
Gas exports accounted for a staggering 46.5% of Bolivia’s total exports in 2014, generating $6.01 billion out of a total of $12.90 billion. By 2024, this figure had dramatically dropped to 18.1% ($1.61 billion out of $8.92 billion), underscoring the urgent need for intervention in the sector.
Both Quiroga and Paz have acknowledged the critical issue of the declining natural gas production in their campaign proposals. Quiroga advocates for direct subsidies to producers to stimulate output, while Paz proposes a mix of legal and fiscal incentives, coupled with a reduction in subsidies. This divergence in approach highlights the candidates’ differing visions for revitalizing the sector.
Argentina’s reduced imports from Bolivia, stemming from increased production at the Vaca Muerta field, have positioned Brazil as a more likely target for Bolivian gas exports. Quiroga emphasizes the need for investment in renewable energy, noting that approximately 70% of Bolivia’s electricity generation relies on thermoelectric plants fueled by natural gas. By diversifying energy sources, Bolivia could reduce domestic gas consumption and free up more resources for export, potentially enhancing the economy.
Power demand has historically represented between 40% and 50% of Bolivia’s overall domestic gas consumption. Both candidates propose cutting subsidies in the domestic market, where gas prices are significantly lower than export prices. For instance, Bolivia sells gas to Petrobras in Brazil at prices ranging from $6 to $7 per MMBtu, while domestic prices hover around $1.00 to $1.40 per MMBtu, highlighting a substantial disparity.
Quiroga and Paz aim to enhance natural gas exports to Brazil and Argentina while improving the legal framework to attract foreign investment. They believe that creating a stable business environment will encourage foreign firms to explore Bolivia’s energy reserves, potentially increasing gas production and exports. However, attracting new upstream investments may face hurdles, particularly if they are located far from existing infrastructure.
The candidates recognize that increasing gas production will likely require collaboration with external companies. The success of Bolivia’s initiatives to boost production could significantly impact both Argentina and Brazil. For Argentina, Vaca Muerta’s gas production is expected to exceed domestic demand, necessitating the exploration of new export markets. Enhanced stability in Bolivia’s gas sector could provide a reliable export route to Brazil, although it may also intensify competition due to the increased costs associated with transporting gas from Vaca Muerta to Brazil.
For Brazil, an uptick in Bolivian gas availability would bolster supply security via the Bolivia-Brazil pipeline, operated by Transportadora Brasileira Gasoduto Bolivia-Brasil (TBG). Investments planned by Nova Transportadora do Sudeste (NTS) and TBG aim to upgrade pipeline infrastructure, increasing capacity to transport pre-salt gas to the TBG grid amidst declining production from Bolivia.
As the Bolivian political landscape shifts, the future of the gas sector remains uncertain. The next presidential term promises to shape not only Bolivia’s energy policy but also its standing in the regional gas market, with potential ramifications for its relationships with Argentina and Brazil. The outcome of the upcoming runoff election will be critical in determining the direction of Bolivia’s natural gas industry and its capacity to meet both domestic and international demands.
