SANTIAGO, Chile, March 5 (UPI) -- Social upheaval in Bolivia is jeopardizing a multinational $5 billion project to export natural gas to the United States and Mexico.
As the administration of President Gonzalo Sanchez de Lozada walks a fine line between cutting government spending amid ever-growing opposition, a 430-mile gas pipeline initiative sponsored by the Pacific LNG consortium has taken a backseat.
The consortium comprises Spain's Repsol-YPF and the United Kingdom's British Gas, each with a 37.5 percent stake, along with Pan American Energy, a subsidiary of British Petroleum, with 25 percent.
Back in mid-2001, when the initiative to tap Bolivia's vast gas reserves -- 52.3 trillion cubic feet -- was announced, it caught the attention of Chile and Peru. These neighboring countries are both natural candidates to ship the commodity, given that Bolivia is landlocked.
But the lack of sea access, Bolivia's historical relations with its neighbors and domestic economic problems, are combining to delay the government's decision over which country should develop the project.
Animosity between Bolivia and Chile dates back to the 19th century, when Bolivia lost its coastal territory to Chile. The lack of access to the sea has long been considered by Chile to be a major barrier to economic growth. It's also a source of enmity with Chile, which annexed the territories after defeating Peru and Bolivia in the "War of the Pacific" of 1879.
According to Bolivian Energy Minister Fernando Illanes, in choosing the port through which the gas will be shipped, the authorities must "win the majority support of the population."
Reducing anti-Chilean sentiment will be tough for the Sanchez administration, given Bolivia's economic ills. More than 70 percent of Bolivians live under the poverty line and more than a third of its 8.4 million population can't afford enough food.
Bolivia is seeking a $4 billion loan from the International Monetary Fund, but to get the money, it must make comprehensive budget cuts. And the administration hasn't been helped in this predicament by socialist opposition leader Evo Morales, who has repeatedly called for improved social conditions -- and who has also repeatedly vetoed the Chilean option in any gas pipeline deal.
The decision over developing the project has been repeatedly delayed by the Bolivian authorities, who cite many additional difficulties to justify their lack of resolution.
Illanes said the pipeline project "is an extremely complicated business given the size of the investment." He stated, however, that the main reason for the delay in decision-making lay with Pacific LNG.
He said that the government was waiting for the consortium to sign an agreement with Sempra Energy to commercialize a daily average of 800 million cubic feet of Bolivian gas to Mexico and Southern California.
Illanes said that the agreement should have been signed by Feb. 14 but that there were "problems regarding the mutual guarantees that these companies must give each other (so as to sign) a long-term contract."
In January, he told the British Broadcasting Corp. that picking either a Peruvian or a Chilean port would be pointless "if the sale of our gas to the United States is not guaranteed."
The many delays recently led Miguel Angel Remon, vice-president of exploration and production of Repsol-YPF Argentina, to say the initiative would be indefinitely halted. And rumors abound in the industry that Pacific LNG will scrap the project and pursue other investments in Australia and Trinidad and Tobago.
Although an agreement hasn't been reached, Sempra is building a receiving terminal for the gas in Ensenada, Baja California, a signal that the initiative isn't completely dead. The company, however, might also work with other natural gas suppliers.
Company spokesman Tom Murnane told the Bolivian newspaper La Razon that "to date, Sempra has not signed an agreement for the supply of liquefied natural gas for the terminal we are building in Mexico, although the company is evaluating different alternatives."
A similar statement was made by Hector Madariaga, Sempra's country manager for Chile, who claimed that "if the Bolivian government's decision is not swift and correct we will look for other markets."
Bolivian energy authorities are studying several reports on the technical feasibility and convenience of exporting the gas either through the Peruvian port of Ilo or the Chilean one of Patillos. These include a study done under the previous administration of President Jorge Quiroga as well as a report from Pacific LNG.
The latter, analysts have said, should be inclined towards the Chilean option. In the past, Pacific LNG representatives have said that the Patillos port is 150 miles closer to the Bolivian gas field of Margarita, from which the energy will be extracted.
An additional report from Global Energy Consultants is pending, possibly in March. The information is said to be pivotal for the Bolivian authorities to finally make their decision.
