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ISSUE 109 | 2022

YPFB/ENERGÍABolivia Digital

The president of YPFB, Armin Dorgathen, assures that 2022 is a “record” year and that the Government has the objective of selling gas at the best possible price.

Bolivia continues to be a reliable supplier of natural gas in the region and especially for Brazil and Argentina, its two traditionally captive markets. If the current volatile trading environment is observed, where prices have been rising since the beginning of the war between Russia and Ukraine, Bolivia has not ceased to be in an expectant position due to its status as a gas producing country. However, some things have changed.

On the one hand, the country has been facing the production decline of several gas fields for many years, as Armin Dorgathen YPFB Corporation’s president highlights in the interview. This situation is undeniably affecting the country's status as a supplier of natural gas; since the pace, price and production volumes to which the country was accustomed to since the ‘’natural gas boom in Bolivia’’ and the raw materials bonanza during 2006 reached a tipping point.

“Obviously we are in a stage where we have a limited production of hydrocarbons and we have to allocate them in the best markets and at the best prices, thus, we are working to find new resources promoting exploration , while being able to allocate our gas to good markets”, he said.

Dorgathen assures that the country seeks to reverse this situation based on an exploration plan that is currently underway, but he points out that at the moment there is enough gas to supply the internal market (even to support gas industrialization projects such as the urea plant and a new one about to be built very soon); the exports to Brazil and Argentina; and, the opening of new markets, emphasizing that "YPFB is a serious company that fulfills its commitments."

"At the moment Bolivia has gas, we are producing around 45 million cubic meters/day and the goal is to continue growing," Dorgathen said, highlighting the country's status as a reliable natural gas producer, despite recurring rumors about the crisis in the sector, mainly due to the lack of investment in exploration of new fields.

A SUCCESSFUL RENEGOTIATION

He said that within the terms and conditions of the eleventh addendum made on August 5th this year to the original purchase and sale contract of natural gas signed with Brazil in 1996, YPFB has successfully renegotiated with Petrobras the terms and conditions of its energy sales contract, getting an additional income for Bolivia.

He explained that "this addendum is on the best interest of the country in order to avoid any possible fines in 2022, on the other hand, it is improving the weighted price of fuel exports to the neighboring countries and reduces uncertainty in the contract between YPFB and Petrobras till it is accomplished"

“The new agreement provides greater flexibility for the fulfillment of the commitments assumed by YPFB and guarantees more certainty for the volumes committed till the completion of the contract with Petrobras. On the other hand, a better compensation for the transportation costs assumed by YPFB was achieved through a better gas valuation and an additional premium for additional quantitates that goes beyond YPFB's commitments in the current contract”, he said, highlighting that Bolivia managed to keep the exports volume of 20 million cubic meters/ day (MMm3d), as well as giving priority to the country’s capacity to allocate volumes to other markets that could potentially offer interesting prices.

“In January we managed to sell our gas at 13.8, and we even reached a record price of 21 dollars. We have the objective of selling gas in the best possible way to different markets , which allows us to improve the weighted price of natural gas, thus generating additional resources for YPFB”, he said.

He assured that the new addendum to the Natural Gas purchase contract ‘’GSA’’ (Gas Supply Agreement, for its acronym in English), will enable YPFB to have a greater availability of the product, a scenario that will make it possible to increase income for the country.

MILESTONES

“We have been negotiating this addendum for a year and a half. We finally signed this agreement that allows us to obtain greater benefits and it represents a milestone in the negotiations that YPFB has with Petrobras”, Dorgathen said.

“…the signing of gas purchase and sale contracts, both with Argentina and Brazil, have allowed the three countries to develop an important industry around gas…”

At the same time, he clarified that the aforementioned Addendum is a consequence of the previous agreement that YPFB made with IEASA (Integración Energética Argentina S.A.) within the terms and conditions of the gas supply contract that Bolivia has with Argentina, which allowed the state oil company to trade the energy supplied during the winter of the current year, at record prices practically doubling previous prices.

Along these lines, Dorgathen argued that the signing of purchase and sale gas contracts, both with Argentina and Brazil, have allowed the three countries to develop an important industry around gas and has it as the main energy generator in the region, highlighting the possibility of renegotiating these contracts in order to reach a joint benefit.

RECORD YEAR

"That is why we can say that 2022 is a record year for Bolivia," said Dorgathen while evaluating the latest addendum signed with Brazil, which was engineered for a better adaptability of the volumes committed to the Brazilian market in the current year, as well as minimizing possible fines for supply failures.

“In addition, it improves the weighted price applied to Natural Gas commercialization, since it generates better income for the regions, the producers, YPFB and for the country in general. In the same way, the addendum generates certainty regarding the volumes committed for the Brazilian market, until the completion of the GSA contract”, assured the senior executive.

He cited as another important milestone, the participation of the operators Canacol, a Colombian oil & gas company, and YPF from Argentina, where both companies will invest in the country, assuring that this had never happened before in Bolivia, where the country was accustomed to the presence of long-standing foreign companies such as Shell and many others. According to Dorgathen, this shows that YPFB's main objective is to pave the way towards a scenario where natural gas commercialization levels could be kept in a high demand environment to satisfy foreign markets such as Brazil, which has a significant natural gas demand.

In this context, Dorgathen said that the objective is to make joint investments; both privately and publicly, to sustain natural gas reserves and adequately manage the markets. "The idea is to reach interesting production volumes that will enable the allocation of natural gas efficiently and effectively, in an expected scenario," he remarked.

“We are working hard to have better opportunities to sell natural gas, thus, we are working with a fairly aggressive exploration plan that is aiming towards an objective market with good prices, as well as the development of attractive exploration projects in Bolivia, as part of a joint effort with IASA, PETROBRAS and other contracts that we are signing day by day with different Brazilian companies, to assure that our gas will find the best possible markets”, he said, reaffirming that YPFB is working to increase the country’s gas reserves.

"...the purpose is to make joint investments, both at the private and public levels, to sustain natural gas reserves and adequately manage the markets..."