Bolivia’s General Juan José Zúñiga stormed the presidential palace in La Paz on Wednesday (June 26) in a short-lived attempted coup that laid bare political and economic chaos in the landlocked nation.
NGI spoke to analysts who highlighted the changing energy fortunes in Bolivia that have turned the country from being a major natural gas exporter into one that relies on the import of hydrocarbons to keep its economy running.
Doubts remain over whether it was a genuine coup attempt, or staged. But in the end, it could serve to prop up President Luis Arce who faces an economic slump amid low popularity.
“What you have is President Arce is very weak politically,” Alvaro Rios, a former minister of hydrocarbons in Bolivia, told NGI’s Mexico GPI. “He has little support and he also has a very weak economy. He had been the minister of economics of Evo Morales. And then he became president.”
Morales is the former, long-standing leftist president who now seeks re-election. He was also the architect of the nationalization of Bolivia’s natural gas fields in 2006.
“Arce has seen a lot of social unrest. And there is no way to solve this situation. An auto-coup is trying to demonstrate that he has power and that he is defending democracy,” Rios said.
Officials at the country’s central bank said recently that the import of hydrocarbons was draining state coffers of hard currency reserves.
“There is a shortage of diesel and gasoline, the dollar has been soaring. You can see inflation coming up,” Rios said.
Natural gas production in Bolivia has also been in steady decline. Production is projected to hit 31.9 million cubic meters/day (Mm3/d) this year, down from 36.3 Mm3/d last year, 41.3 Mm3/d in 2022 and 45.1 Mm3/d in 2021, according to the state oil and gas firm Yacimientos Petrolíferos Fiscales Bolivianos (YPFB).
In 2014, natural gas production reached 59.6 Mm3/d. At the time, over 80% of this production would get to Argentina and Brazil as exports through a far-reaching pipeline system developed in the region. It proved to be a crucial economic backbone for the country.
“Bolivia is switching from a natural gas and energy exporter – this includes liquid petroleum gas and condensate – and now we are becoming a net energy importer,” Rios said. “And there are subsidies in between. This situation is really killing the country. It is a failed exploration policy. And now [Arce] is trying to blame everything on Morales. He is very weak….And the energy sector has a lot to do with it. It used to supply the country with a lot of dollars. Now we don’t have dollars to import fuels and there are shortages.”
Rios projects that Bolivia could have to start importing natural gas by 2029 for domestic use. He thinks energy imports could cost the country some $5 billion annually. Wood Mackenzie previously forecast that the country would become a net gas importer in 2030.
Mirroring Venezuela
“In a way, it’s sort of a slow-motion version of what happened in Venezuela in many ways. The results were a decline in investment in gas and reserves and eventually production,” Rice University’s Francisco Monaldi told NGI’s Mexico GPI.
Venezuelan firebrand Hugo Chávez started to exert more state control over the oil and gas sector in his country starting in 2002 only to see oil production plummet to less than 1 million b/d today from around 3 million b/d.
“Even the companies that were still interested in doing business in Bolivia were convinced that there was no future there overall. Overall, a sad story of decline that doesn’t look promising at all. And of course that translates into politics,” Monaldi said.
“The economic situation, the lack of dollars… it’s creating a political crisis. Even though it was not these crazy policies that Hugo Chávez implemented that led to a horrible collapse… but Bolivia in the long run has not only wasted its massive resources in natural gas but has gotten into a very bad situation. And in the case of gas, it doesn’t look likely to change.”
He added, “and of course they now have this potential opportunity of using the pipeline to Brazil to export Argentine natural gas which is an amazing development that I would not have foreseen a decade ago.”
Rios said the new business model, in which Bolivia would essentially be a natural gas transport intermediary between Argentina and Brazil, would not make a major difference to the nation.
“We used to export at $10/MMBtu and now we are going to make a dollar in transport fees,” he said.
Changing Landscape
Argentina’s Nestór Kirchner pipeline is operating, flowing natural gas from the Vaca Muerta shale patch to Buenos Aires. But more needs to be done for Argentina to replace Bolivia as the region’s main natural gas exporter.
Argentina has “excess capacity of gas production and limited infrastructure to place that gas,” Rios said. He added, “I see important companies interested in independent pipelines.”
But the results of higher production and some new infrastructure are already being felt. This winter in the Southern Cone, Argentina’s LNG imports are dropping as the country moves to eventually become a natural gas exporter.
In late May during a severe cold snap, despite importing an “emergency” liquefied natural gas cargo, “Argentina has imported far fewer cargoes so far in 2024 compared to the same period last year,” Jonathan Lacouture, principal analyst natural gas and LNG at Kpler, told NGI’s Mexico GPI.
Argentina has imported 0.35 million metric tons (mmt) this year compared to 0.72 mmt through June 2023.
“In fact, a Freeport LNG cargo originally slated for delivery into the Escobar LNG terminal on June 26 was diverted to Europe on the 23rd,” Lacouture said. “Argentina also tendered for far fewer cargoes than last year. So far, Argentina has only tendered for 27 cargoes for the 2024 Southern Hemisphere winter, compared to 44 last year. It is also important to note that Argentina is also only operating a single LNG import terminal this year.”
Meanwhile, Argentina’s 51% state-owned oil and gas company YPF SA is aiming to sanction a large-scale LNG export project by mid-2025.
YPF and Malaysian national oil company Petroliam Nasional Berhad, aka Petronas, signed a memorandum of understanding in 2022 to jointly explore the potential for the LNG export project. Plans are to bring an existing floating LNG facility with 1-2 mmty of capacity to the country by 2027. A second phase could involve two additional floating facilities with capacity of 8-9 mmty, which could begin operations by 2030.
