Marco Belmonte / La Paz
Argentina is negotiating the option of paying up to 10 dollars more for the additional volumes of natural gas that Bolivia can send in winter, according to the meetings that are taking place; however, the negotiation lasted for a month.
On Thursday, the state-owned Bolivian Fiscal Petroleum Deposits (YPFB) and Argentina Integration (IEASA) negotiated the signing of the sixth addendum to the natural gas purchase-sale contract that should have entered into force yesterday.
The Bolivian state oil company, in a brief statement, reported that with Ieasa they agreed to prolong the negotiations of the sixth addendum for one month.
He added that during this time “the terms and conditions will be defined so that this agreement on the natural gas that Bolivia exports to northern Argentina is positive for our economic reactivation.”
According to the portal of the specialized energy newspaper www.econojournal.com.ar, initially the focus of the negotiation was on the amounts that Bolivia was going to be able to send.
Sources close to the negotiation assured that medium that finally Argentina would have agreed to pay a differential premium over the value established in the contract, which according to the planned polynomial formula is around 8 dollars per million BTU (thermal unit British).
The new scheme that is being defined foresees that Argentina pay a base offer of 10 million cubic meters per day (MMmcd) at the originally scheduled price and above that amount agree to pay an additional 10 dollars per million BTU.
Thus, the incremental gas price would reach $18 per million BTU.
It is estimated that based on the 10 MMmcd, Argentina will recognize a premium, as an incentive, of 10 dollars per million BTU above the price established in the contract.
In other words, the final price of this incremental gas -which will be interruptible and that Bolivia will send only to the extent that it has the capacity to do so- will be around 18 dollars per million BTU.
YPFB is expected to commit to injecting, at least for a good number of days, up to 14 MMmcd of gas between May and August, according to sources familiar with the negotiation.
That medium reports that the modification of the electrical energy dispatch in Brazil generated the conditions to redirect the commercial discussion with Bolivia.
The rains recorded in March restored the reservoirs of the Brazilian hydroelectric complex, which today are around 65% of their capacity.
What’s more, the marginal cost of energy in the Brazilian spot market is practically given away, because it trades at around 10 dollars per megawatt hour (MWh) required, he reported.
Enojournal cites that Brazil, which enjoys priority to acquire gas from Bolivia, plans to take less supply of the hydrocarbon produced in that country.
That leaves room for Argentina to import more gas from Bolivia.
The fifth addendum to the gas sales contract expired in December 2021.
In that document, Bolivia undertook to send 14 MMmcd in winter.
The negotiation of the sixth addendum has suffered two extensions so far, the first for January and the last for two months. Bolivia promised to send 7.5 MMmcd.
Mauricio Medinaceli, energy consultant and former Minister of Hydrocarbons, expressed his opinion before knowing the information from YPFB about the extension of the negotiation term, that if Brazil demands less gas, it is possible to send that margin to Argentina. “There is an additional prize of 10 dollars on a volume greater than 10 MMmcd. Because gas prices are higher due to the context of the armed conflict”, he pointed out.
He assured that this could be positive for Bolivia, but clarified that the final contract to be signed must be known, since this higher price would be paid on marginal volumes.
Álvaro Ríos, former Minister of Hydrocarbons, said that it is currently difficult for Bolivia to send 12 MMmcd to that market.
In his opinion, a new postponement of a long-term agreement is not serious for the two countries and the two companies.
He stressed that in summer the maximum that Bolivia can commit is 7 MMmcd and in winter 12 MMmmcd, as long as the X-10 well in Margarita comes into operation.
The Boicobo Sur-X1 well, which found around one trillion cubic feet (TCF) of gas, is also expected to enter production in June this year.
As of October 22, 2021, the volumes sent by Bolivia were below the contract, which was 8 MMmcd from October to December.
