Punishing Bolivian Taxes Deter Gas Exploration
Exploration activities to discover more natural gas in Bolivia have been deterred mainly by one thing: a high flat tax rate at the well-head.
“I think the main barrier to Bolivia not developing more exploration activities is its high flat tax rate to do deep exploration in unconventional areas,” Alvaro Rios Roca, Gas Energy Latin America’s managing partner told NGW in a September 9 interview.
Bolivia, the small South American country with estimated proved natural gas reserves of 10.7 trillion ft³ at December 31 2017, has struggled to boost proved reserves in the last four years, according to a recent reserve report by Canada’s Sproule International. The report showed a slight increase in proved reserves since they were last certified in 2013, but with important movements from the proved plus probable (P2) category to the proved (P1) category and from the proved plus probable plus possible (P3) category to P2.
“In the last four years, Bolivia hasn’t added any reserves whatsoever into the P1, P2, or P3 categories,” said Rios, who worked formerly as executive secretary of the Latin American Energy Organization (Olade) between 2006 and 2007 and in Bolivia’s ministry of hydrocarbons between 2003 and 2004.
Growth in Bolivia’s natural gas reserves hasn’t kept pace with those of other South American jurisdictions, especially Argentina and Brazil. For more than a decade, those two countries were the only recipients of Bolivian gas exports. But developments in Argentina’s Vaca Muerta area and Brazil’s pre-salt region offshore have helped boost reserves to 11.6 trillion ft3 and 13.5 trillion ft3, respectively, according to BP, and to the point that Bolivian gas must now compete in these markets against rising local gas production and LNG imports.
Despite nationalising its oil and gas sector in 2006, Bolivia continues to maintain open and good working relationships with oil companies and investors from Brazil, Europe, and Russia. As a result, many oil analysts covering the country, including Rios, believe the natural gas reserve problem is more economic than anything.
“It’s more economics since we see Bolivia’s president Evo Morales and his government have good relations with international oil companies such as Total, Repsol, Gazprom, and Shell, but [they] only do projects that are economic,” said Rios, who holds a chemical engineering degree from Texas A&M University.
While land-locked Bolivia is scrambling to find markets for its gas, it’s not quite game over yet. The short-term horizon holds some promise, with three wells being drilled and two more planned for next year. Results from these wells could prove up another one to three trillion ft3, which could be beneficial in helping the country secure contracts with investors in Brazil and potentially Paraguay looking for supply security.