Bolivia Oil & Gas Report Q2 2013 - New Market Research Report

Boston, MA -- (SBWire) -- 03/18/2013 --BMI View: 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. This is particularly true given the uncertainty that pervades the business environment, which may have an impact on both investment and production. Although condensate volumes from gas production may support a surprise to the upside for liquids volumes, our oil forecast remains bearish. Overall, we expect oil output to trend downwards - notwithstanding occasional recoveries in output due to condensates production - as existing crude fields move towards depletion.

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

- The awarding of licences to Petrobras and BG Group in December 2012 will draw much-needed exploration and production (E&P) activity into Bolivia. However, 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.
- Investment in Bolivia's upstream sector continues to be undermined by the country's poor business environment. Disappointing interest in exploration licences targeting five areas around the country led to the cancellation of a licensing round launched in early 2012. In September 2012, YPFB annulled the exploration rounds, with the UK's BG Group, Petrobras, and a local Repsol subsidiary the only bidders. The Bolivian national oil company (NOC) said it would relaunch the round and work to attract additional interest.
- While we forecast gas production will rise over the short term before peaking at 22bn cubic metres (bcm) in 2018, we believe inadequate upstream investment and declining reserves will lead to a fall in gas output in the years that follow. Resource nationalism and policy uncertainty continue to discourage the upstream investment necessary to significantly raise our outlook for Bolivia's oil and gas sector.
- At present, rising volumes should allow Bolivia to meet its export requirements to Brazil and Argentina - its main export markets. 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, however, 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.

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