Bolivia May Limit Natural Gas Exports to Brazil

Bolivia may place a cap on its natural gas exports to Brazil during the coming southern winter, freeing up production for Argentine consumers facing a renewed energy crunch.

YPFB, Bolivia's state-owned oil and gas group, is expected to increase supplies to Enarsa, its Argentine counterpart, which pays $7 (€4.8, £3.6) per British thermal unit (BTU), the standard measure of thermal value.

Supplies to Petrobras, the Brazilian government-controlled oil group which pays $5.6 per BTU, are likely to be capped.

Luiz Inácio Lula da Silva, Brazil's president, held talks with Álvaro García Linera, Bolivia's vice-president, on Wednesday. Yesterday Mr Garcia Linera also visited Petrobras.

Mr Lula da Silva is expected to meet presidents Evo Morales of Bolivia and Cristina Fernández of Argentina in Buenos Aires at the end of next week to discuss the issue.

"It is probable that there will be an increase in demand in Brazil and Argentina during the winter months," Mr García Linera told reporters. "These new volumes will be discussed by the three presidents. They will reach an agreement to the satisfaction of everybody."

Both Brasília and Buenos Aires import Bolivian natural gas, which is increasingly in demand for Brazilian industry and to make up for shortfalls in Argentine domestic production.

Argentina is already facing severe energy shortages. In Brazil, where most electricity is generated by hydro-electric plants, low rainfall has increased reliance on fossil fuels.

As the southern hemisphere winter approaches, demand from both customers will surge and exceed YPFB's production capacity.

YPFB has contracts to supply up to 30m cubic metres of gas per day to Petrobras and 7.7m to Enarsa. It must also supply about 6m cubic metres per day to meet domestic demand.

But YPFB is only supplying about 27m cubic metres per day to Petrobras and about 3m to Enarsa.

"Bolivia has very limited capacity," said Carlos Alberto Lopez, a former Bolivian hydrocarbons vice-minister. He predicted the talks would go Bolivia's way.

"They won't step on each other's toes," he said. "Brazil wants to win back some of the influence it had over Bolivia, which it has lost to Venezuela."

Petrobras has been unwilling to invest in Bolivia since its assets were seized by Bolivian troops in 2006, when the country's oil and gas industry was nationalised. But a person familiar with the situation said Mr Lula da Silva would overrule Petrobras's objections in favour of Brazil's foreign policy interests, and most likely relieve YPFB of any fines payable for supply shortfalls under its contract.