A photo of workers of the state oil company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) drilling an oil well. CREDIT: YPFB
By Franz Chávez
LA PAZ, Jun 19 2023 – One of the largest natural gas reservoirs in South America is showing signs of decline and the hopeful expectations that emerged in 2006, to turn Bolivia into a regional energy leader, are waning.
When the fossil fuel bonanza was already showing signs of fatigue, then president Evo Morales (2006-2019) announced in the middle of his election campaign, in March 2019, the discovery of what was described as a “sea of gas” in the department of Tarija, in the south of the country.
But the certainty of a future natural gas boom gave way to a downward trend in the sector that is currently affecting production and sales and has shattered the hopes that gas would remain the engine of internal development for a long time to come, according to industry experts.
“They strangled the goose that laid the golden eggs,” said Gonzalo Chávez, an analyst with a PhD in economics, who pointed to a 3.2 billion dollar drop in gas revenues between 2014 and 2021. The decline is attributed to the lack of exploration of new reserves.
In 2014, oil and gas revenues amounted to nearly 5.5 billion dollars, compared to less than 2.3 billion dollars in 2021, according to Chávez’s calculations. The fall is considerable, more so given that in 2021, public spending totaled 2.6 billion dollars. The economy grew that year by 6.5 percent, according to the Ministry of Economy and Public Finance.
The state-owned oil and gas company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) “has shown that it does not now have the technical or financial capacity to explore or develop new fields,” economic analyst Roberto Laserna told IPS.
The company’s website reported that the investment in exploration and exploitation of hydrocarbons for the period 2021-2025 amounts to 1.4 billion dollars, and quotes its president, Armin Dorgathen, as stating that the aim is “to change this situation of the importation of fuels.”
On Jun. 12, the YPFB announced that the testing stage at the Chaco Este X9D oil well, located in the province of Gran Chaco in Tarija, “recorded hydrocarbon flows in two reservoirs,” as part of the effort the company is making to show that it is pulling out of the production rut.
Dorgathen announced that the discoveries will contribute an average production of 8.76 million cubic feet per day of natural gas and 281 barrels per day of crude oil.
Questions that IPS sent to YPFB a few days earlier, regarding the drop in gas revenues, received no response.
In the 21st century Bolivia remains dependent on hydrocarbons, both for its energy consumption – 81 percent of which comes from fossil sources – and for its tax revenue – 35 percent of which comes from the industry since the Hydrocarbons Law was introduced in 2005.
This landlocked Andean country of 12.2 million people has an economy traditionally based on extractive activities, especially tin, lead, zinc, copper, gold and silver mining, and more recently and abundantly on fossil fuels, after the discovery of large gas deposits at the beginning of this century.
One of the first measures adopted by Morales upon taking office in 2006 was the total nationalization of the industry, leaving the entire production and marketing chain in the hands of the YPFB. And thanks to the gas boom, 38 billion dollars in oil and gas revenues were obtained in the period 2006-2018, when the steady decline began.
A photo of the Chaco Este X9D well, exploited by YPFB in the Gran Chaco province of the department of Tarija in southern Bolivia. CREDIT: YPFB
Hasty actions
To try to pull out of the crisis, Minister of Hydrocarbons and Energy Franklin Molina announced on Apr. 28 to Congress 18 new exploration and exploitation projects, 11 of which are to be carried out this year, with an investment of 324 million dollars – a plan considered unrealistic by industry observers.
The 11 projects, where oil appears to take precedence over gas, are located in four of Bolivia’s nine departments: La Paz in the west,Tarija in the southeast, Santa Cruz in the east, and the central Chuquisaca.
“The fact that we do not have gas and we are net fuel importers is the fault of flawed government policies” in the sector, financial analyst Jaime Dunn wrote on his social networks.
According to the expert’s calculation, the fiscal deficit for the year 2022 reached 1.7 billion dollars, largely due to the fuel subsidy, because a 159-liter barrel of oil is bought on the international market for an average of 90 dollars and is sold domestically for 27 dollars.
Long gone are the “sea of gas” dreams that in April 2002 led President Jorge Quiroga (2001-2002) and his Minister of Economic Development Carlos Kempff to announce that after a study of 76 oil fields by a US company, it was estimated that the country’s proven and probable gas reserves totaled 52 trillion cubic feet (TCF).
But only 10.7 TCF of proven natural gas reserves were certified in 2018.
The search for new reserves runs up against a legal framework that protects the environment and indigenous lands, where part of the probable sources of hydrocarbons are located. “The constitution contains many obstacles and restrictions to attract foreign companies with the capacity for exploration,” said Laserna.
The rewritten constitution, approved in February 2009, forces companies interested in exploration and exploitation to obtain authorization from the Plurinational Legislative Assembly, with the threat that any permit will be declared null and void if this requirement is not met.
Foreign companies, according to the constitution, are “subject to the sovereignty of the State,” which rules out arbitration and diplomatic demands as a way of solving conflicts.
A photo of the 15-story building of the headquarters of Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), located in La Paz, where the executive and organizational offices of the government-owned oil company have been operating since 2018. CREDIT: Franz Chavez/IPS
Environment and development
In terms of energy production, the constitution prohibits transnational corporations from exclusively managing concessions.
In addition, it places the environment above interests in economic uses of land and gives the local population the right to participate in environmental management, “to be previously consulted and informed about decisions that could affect the quality of the environment.”
These powers granted to indigenous peoples and local communities are protecting the Tariquía National Flora and Fauna Reserve, in the municipality of Padcaya in the department of Tarija, which covers 246,870 hectares, part of which is close to the border with Argentina.
Since 2017, Lurdes Zutara has been a local organizer fighting the entry of oil companies into the area, warning that since the first roads were opened to give access to exploration equipment and teams, the water from the local source that gives rise to rivers and streams has decreased in flow.
Speaking with IPS from her town in Tariquía, the activist said that some families in the communities accepted the entry of heavy machinery, and noted that municipal authorities belonging to the governing Movement to Socialism (MAS) party were facilitating the preparatory operations for oil exploration.
“The immediate risk is drought because the road affects the water intakes,” Zutara said.
She added that things will never be the same, that the relationship among local inhabitants will change because inequalities will emerge between those who obtain development with the support of the company and others who will be left out.
Bolivia is officially a multinational country located in the center of South America, where 41 percent of the population of 12.2 million consider themselves indigenous, according to the last census.
The United Nations Development Program (UNDP), based on data from the National Statistics Institute (INE), described in its latest report on human development the persistence of significant inequalities by geographic area, ethnicity, gender, and socioeconomic status.
In 2018, 54 percent of the inhabitants of rural areas suffered from moderate poverty and 33.4 percent from extreme poverty, compared to 26 and 7.2 percent, respectively, in urban areas.
Against this backdrop, Chávez the economist lamented that Bolivia went from being a major gas reserve in the South American region “to an importer” of fuels, with the subsequent impact on social development.
Laserna concurred, stating that “the outlook for the country is very discouraging” with respect to gas and the expected socioeconomic boost that was to come from fossil fuels.