April 2021 – @alvaroriosroca – Brazil’s natural gas market is undergoing a profound and advanced reform. This is in order to leave behind Petrobras’ devastating monopoly over the entire chain. It is enough to point out that an industrial user in the USA paid between 3 to 5 USD/MMBTU, one in Italy (with imported gas) between 7 to 9 USD/MMBTU and paradoxically one in Brazil between 9 to 12 USD/MMBTU.
As a result, high prices for the electricity sector and for natural gas users made the country less competitive and its citizens had to pay the consequences. Now the natural gas sector is preparing for Petrobras to completely exit all the links in the chain and dedicate itself to commercializing the gas it produces, privatizing almost all its assets for this purpose.
For this and for other reasons (electric power is the basis) Brazil is on the way to demand more natural gas and become a dynamic market with several suppliers, a transportation segment with open access, distributors with more regulation and privatizing assets, and above all users who must learn to look for their gas from domestic production (mainly offshore), LNG imports, from Bolivia and why not consider imports from Argentina as we propose later in this installment.
According to projections of production of natural gas reserves P1 in Bolivia, in 2021 the maximum capacity is 48 million cubic meters per day (MMMCD). In 2023 it will be approximately 42 MMMCD, in 2025 it will be close to 32 MMMCD and in 2030 it will be close to 17 MMMCD. Bolivian market demand will be between 12 to 15 MMMCD in this period.
The scarce exploration in Bolivia was also yeta with several dry holes. Boicobo with luck may yield an additional 2 to 2.5 MMMCD in two to three years. If luck holds at Sararenda X3 and Margarita X10 in about half a decade they could yield some new reserves and production. The Los Monos and San Miguel prospects are very insignificant volumes compared to the existing decline and the demand of the domestic market, the contract with Brazil and the remaining renewals with Argentina.
In this context, the gas pipelines that carry gas to Rio Grande (Gasyrg and Yabog) would have idle capacity, as would GTB (which carries gas to the border) and also TBG on the Brazilian side (which carries gas to Sao Paulo and the south of the country). According to estimates, Yabog/Gasyrg would have 10 MMMCD of idle capacity by 2021. By 2025 it would be at 12 MMMCD and by 2030 at 22 MMMCD. For GTB in 2021 the idle capacity is 12 MMMCD, in 2025 approximately 16.5 MMMCD and in 2030 28.5 MMMCD.
For TBG (if not reversed) 10 MMMCD in 2021, 12 MMMCD for 2025 and 24 MMMCD for 2030. In addition, there is the GOB (Cuiba destination) with idle capacity of 2.5 MMMCD and with a large market that can be expanded. All this unused capacity should and can be used and storage can be considered in Bolivia to serve for the oscillations and seasonality of production and demand. That is to say, winter peak in Argentina and low season in Brazil. A true integration project using existing infrastructure.
The optimal alternative is that the gas already discovered (shale) in Vaca Muerta, with efficient exploitation and scale can achieve very low production costs as has already been demonstrated. Production can be ramped up very quickly as demonstrated by Tecpetrol which in 12 months increased from 3 to 16 MMMCD. If a single operator can do this, imagine several operators together could certainly serve a large part of the growing and dynamic Brazilian market. Without timely action the GBS will reverse and the market will be left in the hands of competitive imported LNG and Pre-Salt gas. Bolivia’s pipelines will receive no transportation revenues. As much as we rinse our mouths with integration, we believe it is time to act.
Finally, the adjustments for reversion in the Argentine transportation system to reach Bolivia can be done incrementally without making very heavy initial CAPEX investments as needed for the gas that could go through Uruguayana.
*Former Minister of Hydrocarbons of Bolivia and current Managing Partner of Gas Energy Latin America.