February 2020 – @alvarorioroca – They say that the meaning of flat is nothing more than the courage or daring to do or make something concrete. Well, that’s exactly what YPFB must do with its only two natural gas export markets (Argentina and Brazil) in the coming months. Dare.
The contract with Petrobras expired on 12/31/19. During the transition government, YPFB managed to extend it until March 10, 2020 with the same price formula linked to the price of oil derivatives. However, with lower volumes, due to the fact that YPFB’s production capacity does not exist and that in 2020 it will be between 53 and 54 million cubic meters per day (MCMD).
Definitely a great advance over the nothing left by the former YPFB authorities of MAS in serious and real negotiations. They signed dozens of MOUs as political propaganda. However, now it is time to face the hardest part of these remaining two to three months that will be vital in marking the income of YPFB and the country in the next half decade.
If YPFB were my company, in the next 30 days, I would dare not move with my negotiating team in Buenos Aires and return with a contract signed until 2026 that would replace the Addendum that goes until this end of the year with IEASA in Argentina. The original contract commits volumes of 20 to 23 MMMCD that Bolivia must deliver and that Argentina does not need. This is more than urgent, friends of YPFB.
Buyers in Brazil are looking at this priority commitment that YPFB has with IEASA and what remains of its commercial production capacity. No missions that come and go for two days every two weeks. That is for bureaucratic companies or politicians and not for a YPFB that must sign contracts and market the gas in a timely manner.
Remember that Bolivia’s production capacity is declining and will border on 40 MMMCD (2024) and 30 MMMCD (2026). This, of course, if there are no new discoveries that are developed in a timely manner and/or if there is some increase in production from undeveloped reserves. Let’s cross our fingers and toes to make something happen.
Summary, if we do not resolve with IEASA from Argentina very soon, we have in 2024: 40 MMMCD of production capacity, 13 to 15 MMMCD for our domestic market and 20 MMMCD on average for Argentina under contract. And what gas are we going to negotiate with the buyers in Brazil and/or with the new thermoelectric projects that have to have gas available for 10 to 15 years from 2024 to 2026?
Another issue. Petrobras has been the sole buyer of gas from Bolivia until now. This, in these times of change, does not favor YPFB or the users in Brazil who want a break in the monopoly of the industry in that country. Let us remember that these users pay one of the highest gas prices in the world.
We have heard the declarations of the ANP where they indicate that of the 18 MMMCD that Petrobras plans to buy from YPFB between 2020 and 2021, this company must auction 10 MMMCD in the Brazilian market to the best bidders with an initial margin of 2.4% over the price agreed with YPFB. In other words, Petrobras is an intermediary to make gas more expensive and pay less to YPFB? Let’s see if Petrobras complies with the ANP’s statement and also how the users react to CADE so that Petrobras does not continue to monopolize gas in Brazil.
YPFB must strengthen its gas commercial team and give preferential attention to its clients on both sides of the border. It must literally run around independent users, distributors, thermoelectric plants, etc. and try to win the margin that Petrobras will generate in this negotiation of the 18 MMMCD. Less communicators and managers and more negotiators and technicians is what YPFB needs.
Finally, note that we have talked about YPFB and Petrobras only, because it is the companies that must manage the best negotiations in this new stage and they are responsible for signing the contracts. The Ministries are to forge public policies.
* Former Minister of Hydrocarbons of Bolivia and current Managing Partner of Gas Energy Latin America*