President Gonzalo 'Goni' Sanchez de Lozada took office Aug 6, but having failed to win a majority of the vote, he must form a coalition with another political party. Goni was the energy industry choice to be president and is perceived favorably by investors. He is the owner of Bolivia's largest mining company and was the architect of  Bolivia's privatization program that attracted many of the world's largest energy companies to invest in the country during the past five years. 
 

Natural gas is Bolivia's key export, and therefore a key determinant of Bolivia's economic outlook and political landscape. The country's proven reserves are around 50-trillion cubic feet (Tcf) while likely reserves may be as high as 70 Tcf. Bolivia has made use of this resource primarily through the exportation of gas to Brazil via the Bolivia-Brazil gas pipeline (Gasbol) – the largest private sector infrastructure project in South America. 
 

Bolivia's government is also partnering with an international private sector consortium to develop an LNG export project to North American markets (See Platts Guide to LNG for more information on Bolivia's LNG market). The government and consortium both favor building a pipeline to a Chilean port for export because it is closer to Bolivian gas fields and would cost less. Bolivia's political left wing opposes the project altogether, while the general public favors choosing a port in Peru because of an enduring border dispute with Chile.

BOLIVIA REFUSES to lower gas export prices unless Brazil increases its imports.  At an Apr. 28 meeting, Brazilian President Luiz Inácio Lula da Silva failed to convince Bolivia's President Gonzalo Sánchez de Lozada to revise the contract under which Brazil imports a fixed quota of gas from its neighbor. 

"It is very unlikely that Bolivia will distance itself from what was agreed (with Brazil) in good faith in the past. It is unlikely that we will change the take-or-pay clause of the contract," said de Lozada.  However, Brazilian Energy Minister Dilma Rousseff, who also took part in the talks, declared, "Brazil will only increase the volume of gas imported from Bolivia if the price of the fuel is reduced."  Brazil wanted to revise the take-or-pay clause in the import contract signed with Bolivia in 1996. Under that agreement, Brazil pays for a certain quota of imported Bolivian gas even if it does not need to import the fuel. Brazilian officials claim the take-or-pay provision will cost Brazil more than the present $150 million/year. 

The minimum gas quota Brazil agreed to import from Bolivia is 14 million cu m/day. Under the proposal, the minimum quota would be boosted to 18 million cu m/day by 2004. 

However, Brazil currently takes only 11 million cu m/day. The Brazilian economy is experiencing a severe recession, and it is unlikely that Brazil's gas consumption will increase from current levels for at least the next 2 years, said local analysts. Moreover, Lula's administration shelved an ambitious gas-fired thermoelectric project devised by former President Fernando Henrique Cardoso.  Brazilian officials said the price of imported Bolivian gas has dampened Brazil's demand for the commodity. However, Lozada rejected the possibility of reducing gas prices unless Brazil increases imports. 

Bolivia's natural gas reserves are estimated at 52 tcf, second in Latin America behind Venezuela. Bolivia's economy depends heavily on its gas sales. In addition, Losada faces strong opposition from powerful left wing factions in Bolivia that oppose lowering exported gas prices. 

The Andean Development Corporation (CAF) signed an agreement Tuesday with Bolivia's mining and hydrocarbons ministry to act as the investment bank for a contract to make 250,000 natural gas residential connections over the next five years, the CAF said in a statement Wednesday. 
 

Investment in the project is estimated at US$300mn. The connections are the second phase of a program to increase commercial and domestic consumption of Bolivia's huge natural gas reserves. State oil company YPFB implemented the first phase, which made 19,000 residential connections. 

The CAF will advise and structure the mechanism for offering the contract, which is scheduled to be awarded in the fourth quarter 2003.