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Analysis: Bolivia ups Argentine gas export

disclaimer: image is for illustration purposes only
by Carmen Gentile
Miami, (UPI) Apr 22, 2009
Bolivia is preparing to ramp up exports of natural gas to energy-hungry Argentina in the coming months amid Brazil's decision to cut back on imports, Bolivian energy officials said.

Natural gas exports from Bolivia to Argentina will reportedly increase from 4.5 million to 6.5 million cubic meters per day, said Carlos Villegas, president of the Bolivian state energy firm Yacimientos Petroliferos Fiscales Bolivianos.

Bolivia's decision to increase exports to Argentina ahead of the Southern Hemisphere's winter follows talks between the two nations about ways to meet the full carrying capacity of the natural gas pipeline connecting the countries, which is capable of transporting 7.7 million cubic meters per day.

While the increased demand from Argentina for natural gas bodes well for Bolivia, whose economy depends heavily on the sale of its most precious natural resource, the announcement follows word from Brazil that it is decreasing its gas imports from its neighbor.

Brazilian energy officials announced this week that South America's largest country will import less gas in the coming months because of the heavy rainfall in parts of the country providing additional hydroelectric power.

The decrease in Brazilian imports -- from 30 million cubic meters per day to an estimated 20 million cubic meters per day -- could prove particularly detrimental to Bolivia and a sector that has faced its share of adversity in recent years.

While Bolivia possesses South America's second-largest proven gas reserves, only behind Venezuela, it has struggled it recent years to meet production quotas for neighboring customers like Brazil and Argentina, the latter of which depends heavily on Bolivian gas.

"For Bolivia, Argentina's increasing need for natural gas is fortunate," read a recent analysis of the sector by the international consulting firm Stratfor. "The country is heavily reliant on its natural gas exports for income, and as the second-poorest country in South America, the decline in Bolivia's income will hurt a great deal."

The handling of the gas sector by Bolivian President Evo Morales has proved controversial in recent years following his decision in 2006 to nationalize the sector.

In 2008, three eastern provinces, all with large gas deposits, voted in favor of greater autonomy from the central government, noting that their profits go largely to pay for Bolivian social programs that benefit the largest indigenous population in the west.

Morales denounced the vote, calling it illegal and vowing it would not be recognized by his government. He also called on governors from other provinces in eastern Bolivia to sit down to talks before carrying out their own autonomy votes.

Since then, leaders in the eastern provinces have expressed displeasure with Morales and his nationalization efforts, saying the country's wealthy are unfairly taxed to pay for his social programs. More than 80 percent of Santa Cruz residents voted for more autonomy for the province.

Later that year, the leftist Bolivian leader traveled to Iran to meet with President Mahmoud Ahmadinejad and discussed ways in which Iran could help Bolivia improve its petroleum operations at home, particularly in the natural gas sector.

Morales is not the only Bolivian leader to feel the wrath of his country's citizenry over the handling of the gas industry. In 2003, President Gonzalo Sanchez de Lozada was forced from office during widespread violence that left dozens dead after he suggested Bolivia sell natural gas to its longstanding rival and neighbor Chile, to whom his country lost its coastline during a 19th century war.

The gas issue was eventually the undoing of Carlos Mesa as well. In June 2005, the Bolivian leader faced a round of violent protests over how the gas revenue was being spent. Mesa eventually stepped down, opening the door for Morales' eventual victory and decision to nationalize the gas industry.

Hoping to avoid the same pitfalls, Morales demanded that foreign companies increase their investment in petroleum production or face the possibility of being taken over by the state, as they must be able to boost production capacity to meet growing domestic and foreign demand.

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