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Peru took bolivias gas export share Original Source Link: (May no longer be active)
http://www.forbes.com/markets/newswire/2003/10/20/rtr1115232.htmlhttp://www.forbes.com/markets/newswire/2003/10/20/rtr1115232.html
Bolivia may miss the boat on natural gas exports
Reuters, 10.20.03, 1:42 PM ET
By Jude Webber
LIMA, Peru (Reuters) - While Bolivia was rocked by widespread protests last week against natural gas exports, demonstrations that quickly led the country's president to resign, neighboring Peru was moving ahead in the race to grab North American market share.
The bitter "gas war" in Bolivia, where popular protests toppled President Gonzalo Sanchez de Lozada, has painted export plans as a way to rob South America's poorest country of its natural resources.
Peru, meanwhile, is preparing to fulfill its end of an 18-year deal to sell 2.7 million tonnes of gas a year to Mexico from its Camisea field.
"Peru has shown the North American market that it has the capacity, the will and the political backing to deliver natural gas while in Bolivia we're stuck in existential angst that is giving Camisea a big advantage," said Carlos Alberto Lopez, Bolivia's former deputy minister of hydrocarbons.
"There has only ever been a market for one project, never for a joint project and still less for two projects. Bolivia is about to miss the boat," he told Reuters in a phone interview.
Gas-rich Bolivia now finds itself in a bind -- Peru has beaten it to the North American export market; key customer, Brazil, has just found huge reserves of its own; and political turmoil has sullied its image as a safe place for foreign companies to invest.
Landlocked Bolivia, with Latin America's second largest gas reserves after Venezuela, has not even decided yet whether to export its gas via Chile or Peru.
The Chile option is estimated to be $600 million cheaper. Chile has a sound economy and is the option preferred by the export consortium, but it also incenses many Bolivians who have yet to forgive Chile for taking the country's only access to the coast in a 19th century war.
"What's going to happen is that Peru's (export) project is going to get off the ground long before the Bolivian one, and when Bolivia eventually wants to go, it will have to use the Peruvian port because all the plants will be built," said Peru's former Economy Minister Pedro Pablo Kuczynski, who now advises U.S. group Hunt Oil, which is leading Peru's gas export program.
Privately-held Hunt Oil and South Korea's SK Corp are planning a liquefaction plant south of Lima to turn the gas into exportable liquids. Although Peru only has the Mexican deal so far, they see U.S. sales down the road.
But in Bolivia, last week's protests that brought chaos and claimed over 70 lives led Spain's Repsol to put on hold its plans for up to $6 billion in exports with British partners Pan American and BG Group Plc.
TIME IS MONEY
"Bolivia is definitely losing time and they should see time as money because these are exports that are not being made," said J.P. Morgan Andean economist Luis Oganes. "The decision to export via Peru or Chile has been stalled for over a year."
Indigenous groups in Bolivia are demanding the government nationalize the energy project with proceeds being used to alleviate poverty.
Indian leader Felipe Quispe said he would give Bolivia's new President Carlos Mesa 90 days to abandon the gas project as well as the country's coca eradication drive or face new protests.
Until then, Quispe said there are still road blockades in the Andean heartland around Lake Titicaca, on the border with Peru.
"We are going to have problems with Mesa. ... He has deals with the gringos of the United States," Quispe said.
Peru understands the need to move quickly. Camisea took nearly 20 years from discovery to development, which Deputy Energy Minister Carlos Garaycochea says was "a lesson for us."
Yet, Bolivia, with some 55 trillion cubic feet of reserves, has four to five times as much natural gas as Peru and is already exporting gas to Brazil as part of a 20-year deal.
If the Andean country can come up with a politically viable strategy, analysts say it could still compete with Peru and regain investor confidence.
"I think Bolivia can recover the damage," said Francois Moreau, a former BG senior executive in Latin America.
"Bolivia has missed the boat in the very short term and will lag for a while ... If it is able to beat Peru to phase two (of exports), Bolivia is back on track," he added.
More bad news for Bolivia, though, is that Brazil is consuming less than half the amount envisaged and is seeking to renegotiate terms.
"(Brazil's) Petrobras has just announced a huge discovery of gas. So Bolivia is in trouble if it loses the race to the Pacific and its biggest client, Brazil, starts to develop its own gas," said UBS Latin American energy analyst Marcelo Mesquita in Rio de Janeiro.
Peru says Camisea's development and exports will add 1.2 percentage points a year in growth to its economy, provide a clean, cheap fuel, spark a petrochemicals industry, make Peru a net energy exporter and attract exploration capital. Garaycochea says "Peru is in the shop window as a country with prospects."
"Bolivia was looking excellent ... now unfortunately the image we're projecting is that Bolivia can't take decisions," Lopez said, speaking before Sanchez de Lozada quit on Friday. (Additional reporting by Marco Aquino and Alistair Scrutton)
Copyright 2003, Reuters News Service
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