Report Published: "Bolivia Oil & Gas Report Q3 2013"

From: Fast Market Research, Inc.
Published: Mon Jun 24 2013

While we continue to expect gas production to rise over much of our forecast period, from 2018 we remain uncertain as to whether new production will be sufficient to offset declining volumes elsewhere. For now, we are pricing in a cautiously optimistic view on Bolivian gas production. We expect to see growth over the course of our forecast period to 2022 driven by new investment from foreign players. Yet our caution is underpinned by above-ground developments as well, with concerns regarding the country's business environment a persistent downside risk to our forecast. Although condensate volumes from gas production may support a surprise to the upside for liquids volumes, our oil forecast remains bearish as we expect output to trend downwards - notwithstanding occasional recoveries in output due to condensates production.

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We highlight the following trends and developments in Bolivia's oil and gas sector:

* Progress on upstream deals with Gazprom, Total and YPF should see steady investment in exploration and production (E&P) in Bolivia's hydrocarbons sector, despite broader concerns regarding the business environment - reflected by continued nationalisations in key sectors.
* The deals come shortly after licences were awarded to Petrobras and BG Group in December 2012, which should help sustain continued investment in proving up the country's diminished reserves base. Yet, it is important to note that five areas were actually put out to tender by the Bolivian government, with licences for Madre de Dios, La Guardia, and Alegria going unawarded.
* While we forecast gas production will rise over the course of our forecast period, we currently forecast gains in output to slow from 2020 as new production falls to offset declines elsewhere. Resource nationalism and policy uncertainty continue to discourage the upstream investment necessary to fully tap Bolivia's remaining gas potential.
* At present, rising volumes should allow Bolivia to meet its export requirements to Brazil and Argentina - its main export markets. Exports to Argentina and Brazil were up 21% year-on-year in March 2013. However, we highlight longer-term downside risks to the country's revenues and exports volumes as these countries increasingly pursue the development of their own domestic reserves. At present, it appears demand from Argentina is set to increase as it faces its own challenges in the energy sector and looks to replace more-costly imported liquefied natural gas (LNG) with Bolivian supplies. In Brazil, disruptions to hydropower and the high cost of LNG imports have helped support demand for Bolivian gas imports.

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