How Brazil hopes to reduce the price of Bolivian gas

Brazil is negotiating directly purchasing gas from Bolivia, without the intermediation of federal oil company Petrobras. 

Petrobras subsidiary TBG, which operates the Bolivia-Brazil gas pipeline (Gasbol), has previously signed contracts with Bolivian state company YPFB and resold the gas in Brazil. 

The plans for the direct purchases were announced by Brazil's mines and energy minister Alexandre Silveira while on a visit to Bolivia with President Luiz Inácio Lula da Silva. Boliva has just become a formal member of the Mercosur trade bloc. 

"We had a historic meeting, we made the link between the national industry and YPFB, which is the Bolivian gas industry, so that we can eliminate intermediation, reduce the price of gas and, consequently, increase the competitiveness of the local industry," Silveira said in a release.

A representative of a local Brazilian gas association told BNamericas that the initiative is welcome. 

The government estimates the cost of imports could fall by around 40%. 

According to the latest data from Brazil’s mines and energy ministry (MME), Bolivian gas imports totaled 14Mm³/d (million cubic meters per day) in January, representing about 21% of total supply and demand in the period. 

About 6Mm³/d could be delivered to Brazil from October this year, with 4Mm³/d coming from Bolivia and another 2Mm³/d from Argentina, passing through Bolivia.

Negotiations between the three countries have been intensifying in recent months, including the possibility of having Bolivia – whose gas reserves are in decline – acting also as a midstream agent. 

According to Marcelo Mendonça, commercial technical director of Abegás, which represents piped gas distributors in Brazil, the direct purchase of gas from Bolivia has the potential to increase supply and generate a new price benchmark. 

“There was a view in Bolivia of only trading with Petrobras, and it was very difficult for private agents to access Bolivia directly. This initiative by the federal government reassures Bolivians that [Brazil] is on board with this movement,” he told BNamericas. 

"We have a market that's more prepared for this move, and the Bolivian government itself sees that it needs to find other ways besides Petrobras." 

Mendonça listed as challenges the closing of the agreement to sell the gas, the conditions for access to transportation and distribution pipelines and consolidating demand. "The price of the gas has to be competitive, and it's important that the increase in consumption makes new demand viable in order to benefit everyone."  

In Bolivia, Lula called for Petrobras to invest in the country again.

"We need to discuss how to extract the critical minerals that Bolivia has. How to use all of Bolivia's mineral potential, its gas potential. And Brazil can help Bolivia explore, but also help develop Bolivia because we need to generate development," Lula said. 

GAS PROGRAM

Silveira highlighted that the negotiations with Bolivia are also part of federal program Gás para empregar, which aims to better use the fuel for industry and help the government’s reindustrialization push.

It is estimated that some sectors of Brazilian industry are currently operating at idle rates of 30% due to the high costs of inputs and the entry of imported products at prices below those in the domestic market.