Vesna Marinkovic U.
Bolivia must come to terms with being an importer rather than an exporter of hydrocarbons, at least in the short term, although this also requires significant investments, according to Juan Fernando Subirana in his analysis of how the hydrocarbon sector crisis affects the country’s economy, until recently one of the most important natural gas producers in the Latin American region.
Given the decline in natural gas production, which represented a third of the Gross Domestic Product (GDP), and its impact on the overall national economy, Subirana said that while we have vast unexplored areas with good hydrocarbon prospects, it is advisable in the short term to use all available infrastructure for gas sales to Brazil and Argentina and import this hydrocarbon in time to serve as a link for the export of gas from Vaca Muerta to the Brazilian market.
However, he acknowledged that this also requires significant investments to enable both the purchase of fuel and the maintenance of all gas pipeline infrastructure between Bolivia, Argentina, and Brazil. “Physically speaking, we are capable. However, obviously there are investments that need to be made and there is a policy change that must be accepted and embraced to move forward on this path,” he noted.
In this line, she shared the view of many analysts by pointing out that a vital aspect for the sector was the issue of lack of legal certainty, starting from Law 3056, which would have limited investment possibilities and would continue to do so. This view was shared by Subirana, who reiterated the urgency of drafting a new hydrocarbon law.
COMPLICATED SCENARIO
In this context, both guests agreed that the scenario in the sector is “complex,” although they also highlighted significant pressure from environmental groups to reduce investments in the fossil fuels sector, which becomes another pressure point for the management of Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), facing a noticeable reduction in income to continue producing natural gas and strengthening exploration activities.
“There is an increasingly strong international pressure for environmental protection. In that sense, it seems to me, and it is important to say, that there has always been an attempt to demonize oil investment when, in reality, it is one of the investments that, within its CAPEX budget, incorporates environmental remediation. Obviously, we cannot deny it, there is an impact on the environment, however, it is much less than in other extractive activities,” highlighted Subirana.
…we are in a critical situation, where all sectors of the economy are already experiencing the stress of scarcity, whether it is products, currencies, or even basic necessities.”
According to Pacheco, Foreign Direct Investment (FDI) is vital for the sector, its strengthening, and to prevent its collapse. She stressed that at the moment the country is not attractive to foreign investors, while Subirana reiterated the importance of modifying Hydrocarbons Law 3058, not only in an enumerative manner. He also said that “we need clear conditions to attract new investments, or to provide conditions to the actors who are currently or temporarily betting on Bolivia.”
ON LITHIUM AND LACK OF INFORMATION
Asked whether lithium exploitation could represent an economic alternative to the decline in gas production, Subirana was categorical in stating that there was a lack of information on lithium management in Bolivia. “In the case of lithium, the absence of information must first be highlighted. I think that is a fundamental issue. It is very difficult to make an accurate analysis when there is public ignorance about what the national project really is for the exploitation of geopolitical resources,” he said.
He later wondered about the background of lithium if an extrapolation were made with the Argentine economy, responding that, if the same conditions were to be met; that is, total parity of economic and financial conditions, the best year of lithium production would be equivalent to a third of the best year of hydrocarbon production.
In this context, he asserted that lithium will not replace the dramatic decline in hydrocarbon production in Bolivia. “Obviously, it can be a very important support to the economy; however, there are no voices that can give a certain opinion due to the lack of information, because unfortunately neither YLB nor any government entity has been able to explain the lithium business model,” he emphasized.
Pacheco added that there would also be no certainty about the effectiveness of Direct Lithium Extraction (DLE) technology, proposed as an advance to efficiently accelerate the exploration of lithium carbonate in the Uyuni and Coipasa salt flats, as part of the current government’s agreement with the Chinese consortium CBC (CATL BRUNP & CMOC), with an investment of 1.083 billion dollars in the two salt flats.
“Currently, direct lithium extraction technology allows us to do it in hours, therefore, logically, the process is completely different, costs also decrease along with environmental impacts due to the reduction of water resources. So, for that reason, the selected process, in other words, the process defined by Bolivian Lithium Deposits, to carry out this industrialization process, goes through this updated technology that not all countries have, only companies of the caliber of CATL handle this type of technology that has surpassed the experimental range and has secured the 1.083 billion dollars of investment, which says a lot about the signing consortium,” said the minister, Franklin Molina, in an interview with ENERGÍABolivia.
Regarding this, the French ambassador to Bolivia, Helene Roos, stated to the magazine, in April 2023, that DLE is a technique of great technological advancement, but still under development. “In the case of lithium extraction from brines, the direct extraction technique (DLE) represents a great technological advance that maximizes yields and has a much lower carbon footprint than other traditional techniques. Although this technique is still under development, it represents a very interesting path,” she emphasized.
POSSIBILITIES FOR A NEW ENERGY POLICY?
Asked if they saw the planning of a new energy policy in Bolivia as feasible, Claudia Pacheco argued that she did not envision such a possibility since government announcements for the discovery of new wells and thus the reactivation of the sector have dissipated and at the moment the country is experiencing a kind of “obfuscation” about central issues of the economic agenda, due to the ongoing conflict in the country.
Finally, when asked about the prospects for energy alternatives such as biodiesel, frequently proposed by the current Government mainly in line with replacing fuel imports, Subirana said that “the issue with biodiesel still involves a strong economic component.”
“At the end of the day, for cost efficiency, it’s an expensive alternative, it’s a costly alternative that will ultimately bring a bill to the entire internal production system,” Subirana emphasized, adding that “it’s not a definitive solution either, it’s a palliative to the problems we’re facing.”
…there has always been an attempt to demonize oil investment when, in reality, it is one of the investments that, within its CAPEX budget, includes environmental remediation.”
Pacheco concluded his remarks by stating, “meanwhile, the economy continues to suffer. At this moment, there is a fuel shortage, production is not meeting projected levels; the agricultural sector is very complicated, there are border points where exports are still not possible; we are not increasing foreign exchange earnings; and there is no plan to strengthen the country’s oil reserves, which is something very important, very delicate, something that should be taken seriously by the government and something that all Bolivians should demand to be fulfilled.”
Subirana, in turn, said, “we are in a critical situation, where all sectors of the economy are already feeling the stress of scarcity, whether it be products, foreign exchange, or even basic necessities. There are already several voices speaking about some problems, for example, with the Argentine border, there are some problems also linked to everything related to the labor sector,” adding that there are talks of levels of up to 90% informality in the country’s labor force.
Both agreed that it is time to face strong changes, in terms of public policies, decisions, and consensus to enable proposals, ideas, and solutions that could bolster the country’s economic situation, significantly impacted by the current conditions of the hydrocarbon sector in Bolivia.
