Two experts highlight tax regulation as the major obstacle to the development of Bolivia’s Hydrocarbon Strategy and express concerns about the prospects of the sector in Bolivia, which until recently was a significant natural gas exporter in the region.

ISSUE 121 | 2023

By Vesna Marinkovic U.

What went wrong with the administration and management of Bolivia’s Hydrocarbon Strategy? Oscar López Paulsen and Mario Suárez Riglos, two experts in the hydrocarbon sector in Bolivia with extensive experience in these matters, were consulted. The idea was to find out whether it was a matter of government management, lack of planning, natural resources, and/or lack of trained human resources after the sector’s third nationalization in May 2006 through Supreme Decree 28701 during the early years of Evo Morales Ayma’s administration.

Oscar López Paulsen stated that the fundamental problem for the implementation of the Bolivian Hydrocarbon Strategy (BHS), complementary to nationalization and proposing a long-term vision for hydrocarbon development in the country, was the tax regulation imposed by the government at that time, attributing the lack of investment in exploration, primarily, to Law 3058.

“The government’s take from petroleum was too high in relation to what was left for private operators. From 2004 to 2023, practically no new reserves have been discovered, which means that it is a flawed law and a new one should be drafted,” said López, emphasizing that in a free market world, rules must be more flexible to attract Foreign Direct Investment (FDI) to one of the most dynamic sectors of the national economy.

López Paulsen, a geologist from the University of La Plata, Argentina, with several postgraduate degrees from Uruguay, the United States, and Canada, and who served as the Exploration and Production Manager of YPFB in 2016, stated that while some efforts were made, such as the Incentives Law, they were not sufficient to overcome the fears of transnational companies and promote new investments to boost the sector.

In his view, the second issue that complicated the effectiveness of the BHS was the lack of legal certainty established by the same regulations. He lamented that, under these conditions, many of the companies still operating in the country must deal with non-payment of their rightful rent and face a series of obligations in a sector where investments amount to millions of dollars, and “cannibalism” is not an option.

He acknowledged that under this regulation, some small discoveries were made, such as Yarará and Yope, in the boomerang area, which discovered new fields. However, he regretted that these were not enough to support a true strategy for the hydrocarbon business, as well as the initiative to

LOW GAS AND OIL RESERVES

In the same vein, Mario Suárez Riglos, also a Geological Engineer from the National University of Córdoba, Argentina, with a Master of Science degree from the University of Cincinnati, Ohio (USA), and a Doctor of Geological Sciences from the University of Córdoba, Argentina, agreed on the urgency of having a different contractual framework than the current one, by modifying the tax regime in Bolivia to attract new concessionaires and/or maintain good relations with the companies that remain in the country.

“…this situation really scares us; seeing how all our fields have been declining tremendously. It’s worrying to see that we are heading towards total catastrophe,”