Why transporting Argentine gas to Brazil via Bolivia would be competitive

Argentine gas has all the conditions to reach Brazil at a competitive price via Bolivia, according to Álvaro Ríos, managing partner at consultancy Gas Energy Latin America. 

Ríos said the cost of extracting gas from Argentina’s Vaca Muerta formation is currently around US$2/MMBTU (million British thermal units), while Brazilian industry pays an average of US$17/MMBTU.  

"There’s a very good margin for Bolivia to charge a fee for transportation, for the Argentines to monetize their gas and for it to reach Brazil at a low price, making local industry more competitive," Ríos told BNamericas.  

The Bolivian consultant said acting as a midstream agent is the only possible option at the moment for Bolivia – which has been supplying Brazil for years – given the decline in the country’s natural gas reserves.

"I believe that if Bolivia started exploring now, it would have new gas in eight or 10 years. So, in the meantime, what will it do with its empty pipelines and idle compressor stations?" he asked. 

Negotiations between Argentina, Bolivia and Brazil have intensified in recent months, including on the possibility of Bolivia acting as a midstream player.

But the Bolivians don't want to stop supplying their own gas, and in July they began direct talks with Brazil, without the intermediation of federal oil company Petrobras. 

The negotiations with Bolivia are in line with the federal Gas for Employment program, which aims to make better use of the fuel for industry and help the government's reindustrialization drive.

During a visit to Bolivia, Brazilian President Luiz Inácio Lula da Silva asked Petrobras to invest again in gas exploration in the neighboring country. 

"We need to discuss how to exploit the materials, 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," said the president.

Ríos said that although there are "many prospects" in Bolivia, investing in the country is not a simple task. 

"Bolivia has a tax system that is too high, leading to a very high government take," he said.