Hopes Fading for Bolivia Pipeline Project

By JUAN FORERO

LA PAZ, Bolivia, March 21 — Ed Miller had high hopes in the late 1990's when, as manager for British Gas in this landlocked country, he and another geologist came up with a sure-fire plan to develop and market Bolivia's immense reserves of natural gas.

With an eye on California and its insatiable appetite for energy, three multinationals, including British Gas, soon formed a consortium to build a 400-mile pipeline to the Pacific coast. The idea was to liquefy the gas and ship it to California, with projected sales of $21 billion over 20 years.

But with $350 million already invested, the project that was once heralded as Latin America's largest infrastructure development is now close to collapse, a casualty of roiling nationalism and political turbulence in Bolivia.

"The project is coming to the end of its opportunity window," said Mr. Miller, 47, an American who recently left the consortium and now runs a pipeline that transports gas to Brazil. "I would say the window was wide open a year ago, and now it's almost shut."

Indeed, the government of President Gonzalo Sánchez de Lozada, buffeted by antigovernment protests that killed 30 people in February, has delayed plans to announce a decision on the project's next phase: whether to build a pipeline through Peru or through Bolivia's old enemy, Chile. Instead, the government is now talking about consulting with Bolivians, to let them to make the decision. But the companies of the Pacific LNG project, as the consortium is called — Repsol-YPF of Spain; British Gas; and Pan American Energy, a BP subsidiary — insist that Chile is the only viable option, because building through Peru would cost $600 million more. An American consulting firm working for the Bolivian government recently reached the same conclusion.

Aides to Mr. Sánchez de Lozada said the government was still carefully studying both options.

But people close to the project said the president was actually paralyzed, because deciding on Chile would lead to huge, destabilizing protests.

"The government does not have the political oxygen to decide," said Gonzalo Chávez, an economic analyst and former vice minister of energy.

Opposition to the project is intense and spreading, fueled by left-leaning indigenous leaders who strongly reject the Chilean option. Most Bolivians have never forgiven Chile for snatching Bolivia's coastal province in a 19th-century war, including the region around the present-day port of Patillos, where a liquefaction plant would be built.

The opposition also includes senior military officers who pronounced themselves against the project for reasons of "national dignity." Even the president's partner in the government coalition, former President Jaime Paz Zamora, has questioned the sale of natural gas, saying, "Bolivia must come first."

In one of Latin America's most nationalistic countries, some critics also oppose the very idea of selling gas to the United States, which is viewed as an imperialist aggressor.

"The gas stays here," explained Choque Huanca, a newly elected member of Congress, who represents a left-leaning indigenous political party. "We can consume it here."

Such talk, though, ignores the fact that Bolivia, with a gross domestic product of just $8 billion, could make use of only a tiny fraction of its gas reserves — now estimated at 52 trillion cubic feet, second in Latin America only to Venezuela's. Even supplying California for 20 years would consume only 13 percent of the gas.

Economic analysts say this desperately poor country could vastly improve its economic outlook by positioning itself as an important gas supplier to California before other countries do. Taxes and royalties on exported gas could bring in up to $7.7 billion in a generation.

But to become a great gas power, Bolivia needs foreign capital to finance the Pacific LNG project, whose total cost is estimated at $5 billion or more.

Changing minds in Bolivia will not be easy. Companies of all kinds have faced stiffening opposition to their investment plans as Bolivians have turned against the market reform model once championed by the president.

"There is a repudiation," said José Guillermo Justiniano, minister of the presidency, the executive's administrative arm. "That is why there is a conviction against the model. They see the model as the devil. Market economies are the devil."

The government of Mr. Sánchez de Lozada has been so battered by opponents that it lacks the political capital to undertake austerity measures or make unpopular economic decisions. In an interview, the president acknowledged the influence of his opponents.

"If I announced the second coming of Christ, they would vote against it," he said.

Bolivia's future, though, will remain grim unless it is open to foreign investment, political analysts say.

"The fact of the matter is, you cannot go back on globalization, and no country can afford to isolate itself from the international currents," said Eduardo Gamarra, a Bolivian-born expert on the country at Florida International University in Miami.

Mr. Miller, a Californian who first came to Bolivia in 1978, ran an Argentine company that in the late 1990's was among the first to find major gas deposits. After mapping out the pipeline plan on a barroom napkin, he assumed Bolivians would welcome a project that promised to inject billions of dollars into a moribund economy.

But now, the dream is all but dead — prompting him to abandon Pacific LNG. "I essentially became frustrated and burned out," he said.