Overcoming barriers to investment in

the

A view from the Southern Cone

The George Washington University

Washington D.C.
March - 2002
 Scenario

Since Bolivia is a gas exporting

country, my presentation
aproaches the subject from the
point of view of gas reserves and
gas transportation.
 WORLDWIDE NATURAL GAS RESERVES

4.73%
3.01% 4.90%
37.89% 6.91%

7.46%

35.10%

Eastern Europe Middle East Africa Far East

North America Latin America Western Europe

Source: OGJ Worldwide Production Reports 1-Jan-01

Bolivia De GOLYER & Mac Naughton
January 2001
LATIN AMERICA: NATURAL GAS RESERVES

46.4 %
1.4%
1.2 %
2.2%
2.5%

4.2%
17.3 % 6.7%
9.6 %
8.6%
Venezuela México Argentina Bolivia
Trinidad & Tobago Peru Brazil
Colombia
Ecuador Chile

Source: OGJ Worldwide Production Reports 1-Jan-01

Bolivia De GOLYER & Mac Naughton
January 2001
Natural Gas : Certified Reserves in South America

Country TCF %
Chile 4.4 1.8
Brasil 8.0 3.2
Perú 13.3 5.3
Argentina 27.4 10.9
Bolivia 50.0 20.0
Venezuela 147.6 * 58.8

TOTAL 250.7 100.0

 50.00
46.83

32.21

Growth since 1997

8.58
5.69 6.62 800%

Fuente: YPFB
 Inversión
Total
5 –6 billones de US$
West Coast Australia
9,900 Millas naúticas
Islas Sakhalin
4,000 Millas naúticas
 S.A. Hydrocarbon Position

Exporter Importer

Oil Gas Oil Gas

Venezuela Yes Yes
Colombia Yes
Guyana Yes
Ecuador Yes

Bolivia Yes Yes

Argentina Yes Yes
Peru Yes Yes
Chile Yes Yes
Paraguay Yes Yes
Uruguay Yes Yes
Brazil Yes Yes
 Hydrocarbon Supply and Demand

Hydrocarbon importing countries in S.A.

purchase their oil requirements from
Venezuela, Colombia or Ecuador.
Brazil is the only country with major
purchases from the international market.
Gas is exported from Bolivia and
Argentina
Conclusion:
S.A is capable of supplying its hydrocarbon needs
with significant export surpluses
 Mexico – U.S.A.
interconnections

Transportation Cuiabá

System
Bolivia - Brasil

Existing
International
Gas Pipelines
 Atacama

NorAndino

GasAndes

International Pacífico

Gas Pipelines Methanex

 Uruguaiana

International
Gas Pipelines
 Colombia - Venezuela

Mexico – Itsmo Centroamericano

De la Integración

Bolivia - Chile

Bolivia - Paraguay

Projected Gas Pipelines

.
 Transportation System

Conclusion:

To have a free flow of energy

among the countries it is necessary
to promote the physical integration
of gas pipelines.
Investments in physical integration will
encourage the energy integration in the
region
 To overcome the Investment barriers

The investing Corporation needs:

•Significant hydrocarbon potential

•Reasonable Infrastructure
•Stable Laws of Hydrocarbon
•Political stability
•Contract and Tax stability
•Reasonable Return on the Investment
•Acceptable Environmental Laws
•Compatible Regulations
 To overcome the Investment barriers

The host country needs:

•Technical and Financial Capabilities

•Parent company guarantees
•Government take between 35-50%
•Surtax inclusion
•Apply country regulatory system
•Apply country environmental Law
•Accept and recognize social needs of the people
 Obstacles to investment

The absence of compatible regulations as well as the

disparity of legal and institutional frameworks

Restrictions of different hydrocarbons laws

Bolivia, Law 1689

Transfers UPSTREAM activities to private

investment through joint venture contracts.

Establishes a transparent process for the

nomination of exploration areas.

Eliminates any restrictions for the import, export

and domestic marketing of hydrocarbons and its
byproducts.

Opens DOWNSTREAM activities to private sector

investment.
 Obstacles to investment

Restrictions of different hydrocarbons law

Mexico

Exploration, Exploitation and Marketing are

activities reserved to the State

Transport, Storage and Distribution:

activities open to private investment

Construction, operation and

ownership of systems.
Marketing, exports and imports
Open access to the pipeline system
 A comparison between two approaches

Two political trends clearly defined coexist in

Latin America:

State Oil companies, that increase their participation

in the economy

Brazil, Mexico,Venezuela and Ecuador

Increased their revenues due to

the high oil prices
 A comparison between two approaches

Two political trends clearly defined coexist in

Latin America:

Countries where privatization of state owned companies

took place
Argentina, Bolivia and Peru

Increase in the investment in

exploration and exploitation over the
last five years
 Protection of the land

Indigenous
Territories

Protected Areas

Exploration &
Exploitation

Approximately 40%, 420.000

sq km, of Bolivia´s territory
is closed for investment
 Terrorism

Colombian case

The Caño Limon oil pipeline, 230.000 bpd of capacity, runs

780 kilometres from Colombian's oil fields north-eastern
Arauca department, near Venezuelan border, to the port of
Coveñas

Caño Limon is jointly operated by Colombian state oil

company Ecopetrol and the U.S. oil company Occidental
Petroleum
 Terrorism

Since 1986 there has been 700 attacks again the pipeline which
caused an overalll spillage of 2.2 million barrels of oil.

These attacks can be compared with the worst marine spills:

1967: Torrey Canyon off land´s end in England spilled 830,000

barrels.

1978: Amoco Cadiz off the Brittany coast of France spilled 1.6
million barrels of oil.

1989: Exxon Valdez in Alaska spilled 240,000 barrels.

 Concluding remarks

To overcome barriers to private investment in energy

it is crucial to promote the sustainability of
democracies.

Equilibrium between an open market economy and the

social responses to satisfy the needs of the countries.

Infrastrcture is required to continue with the process

of integration thus making investments possible.
 Concluding remarks

Terrorism is a barrier to which

we do not have an answer today
but it is related to education
and to the understanding of a
new social state of affairs in the
world .
 Concluding Remarks

The understanding of the

major corporations of this
new social state of affairs
will help in overcoming the
investment barriers in Latin
America
www: energia.gov.bo
email: enerhid@energia.gov.bo
 Protection of the land – Bolivian case

Pipeline Bolivia - Brasil

Indigenous Territories Protected Areas

Implementation of the Participation in the

Indigenous Development Trust Fund (US$ 1.7)
Plan (US$ 2 milllion)

Pipeline San Miguel – San Matías

Modification of the route to reduce the impact on the
Chiquitano forest

Indigenous Territories Protected Areas

Implementation of the Constitution of the

Indigenous Development foundation for the
Plan (US$ 2.0 million) Chiquitano forest (US$
20 million) *
Program of reforestation

*: OPIC’s requirement