At a Glance: How Bolivia plans to deal with the oil price crash

Bolivia’s hydrocarbons ministry has outlined a roadmap to navigate the current oil pricing environment impacted by depressed energy demand brought on by the global health crisis.

"For our country, the immediate effect of what happens in the world is null...however, our country always had the dilemma of generating a lot of income from the sale of hydrocarbons, but also an enormous expense reflected in the subsidy, by importing half of its demand for gasoline and diesel."

The ministry poses the question of whether to prioritize more expensive local fuel production or import as much as possible of cheaper refined products. The ministry argues, however, that the latter would curb alternative energy efforts, lead to unemployment and impact balance of payments.

The sector authority highlights the negative impact of the oil price crash on natural gas sales to Argentina (IEASA) and Brazil (Petrobras) as Bolivia uses international crude benchmarks in its gas pricing formula.

Although the ministry expects gas shipments to increase to Argentina in May ahead of the southern hemisphere winter, it expects sales to be lower compared to “normal” periods.

Deliveries to Argentina and Brazil already had been falling before COVID-19.

Read At a Glance: Bolivia’s two-front battle to save natural gas exports

In an interview with television station Unitel, Herlando Soliz, president of state hydrocarbons company YPFB, said the oil price tumble will have an impact of around US$700mn on Bolivia in terms of gas exports this year, but save some US$550mn on fuel imports.

Latest numbers from local foreign trade institute IBCE show that Bolivia’s exports of gas and other hydrocarbons in January-February reached US$459mn, or 32% of all exports in the period, behind minerals which totaled US$713mn or 50% of exports.

For energy consultant and former Bolivian hydrocarbons minister Mauricio Medinaceli, the final impact will be known in three to six months, as gas export prices for this quarter have been defined.

Source: Mauricio Medinaceli

THE ROADMAP

The ministry’s short-term plan calls for maximizing the consumption of domestic gas and reactivating the Bulo Bulo ammonia and urea plant (pictured), which not only would increase gas demand but also generate revenue from the export of urea to the region.

The plan also includes signing interruptible gas supply contracts with new customers starting in October once winter ends to cover possible supply and demand gaps due to reduced offtake by IEASA and Petrobras.

And the roadmap prioritizes, through YPFB, projects to increase storage capacity in La Paz, Santa Cruz and Oruro to support production from the country’s fields - not for the import of refined products - until economic activity resumes.

For the medium term and post-coronavirus environment, the priority should be national industry, such as the financial re-engineering of the liquid fuels market through a temporary fiscal push to promote local production, including green fuels.

Another strategy will be widening YPFB’s footprint beyond Bolivia through partnerships for hydrocarbons industrialization and petrochemicals to develop a logistical value chain for selling products.

“Although these measures have a sectoral focus, they would have a medium-term structural macroeconomic impact regarding investments and movement of foreign currency in the domestic market and capital inflows from abroad, as well as an expansion of efficiency and productive capacity,” according to the ministry.

Photo credit: YPFB