Hope for building a Bolivian pipeline is now down to a trickle
Posted on Mon, Apr. 14, 2003 BY JUAN FORERO Miami Herald.com- New York Times News Service
LA PAZ, Bolivia - Ed Miller had high hopes in the late 1990s when, as manager for British Gas in this landlocked country, he and a fellow geologist came up with a surefire 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. The projected sales were $21 billion over 20 years.
Now, with $350 million already invested, the project -- once heralded as Latin America's largest infrastructure development -- is close to collapse, a casualty of roiling nationalism and political turbulence.
WINDOW CLOSING
''The project is coming to the end of its opportunity window,'' said Miller, 47, an American who left the consortium and now runs a pipeline that transports gas to Brazil.
Indeed, President Gonzalo Sanchez de Lozada's government, buffeted by protests that killed 30 people in February, has delayed plans to announce a decision on the project's next phase: whether to build a fuel pipeline through Peru or through Bolivia's old enemy, Chile.
The government now talks about consulting with Bolivians, to let them make the decision.
But Repsol-YPF of Spain, British Gas and the BP subsidiary Pan American Energy, the three companies of the Pacific LNG project, as the consortium is called, insist that Chile is the only viable option.
That's because building through Peru, they say, would cost $600 million more. An American consulting firm working for the Bolivian government recently reached the same conclusion.
Aides to Sanchez de Lozada say the government is still carefully studying both options, but people close to the project say the president is paralyzed -- because deciding on Chile would more than likely lead to huge, destabilizing protests.
''The government does not have the political oxygen to decide,'' said Gonzalo Chavez, an economic analyst and former vice minister of energy.
Opposition to the project, fueled by left-leaning indigenous leaders who strongly reject the Chilean option, is intense and spreading.
Most Bolivians have yet to forgive Chile for snatching Bolivia's coastal province in a 19th-century war. Included was the region around the present-day port of Patillos, where a liquefaction plant would be built.
Among the opposition are senior military officers who have pronounced themselves against the project for reasons of what they call ``national dignity.''
Even the president's partner in the government coalition, former President Jaime Paz Zamora, has questioned natural-gas sales.
''Bolivia,'' he has said, ``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 many consider an imperialist aggressor.
''The gas stays here. We can consume it here,'' said Choque Huanca, a new member of congress who represents a left-leaning indigenous political party.
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, estimated at 52 trillion cubic feet, second in Latin America behind Venezuela's. Even supplying California for 20 years would consume only 13 percent of the gas.
Analysts also point out that 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.
And changing minds there 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 their president.
''There is a repudiation,'' said Jose 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 Sanchez de Lozada has been so battered by opponents that it lacks the political capital to undertake austerity measures or to make unpopular economic decisions.
GRIM VISION
Bolivia's future will remain grim unless it opens up to foreign investment, political analysts say.
''The fact of the matter is that you cannot go back on globalization and that no country can afford to isolate itself from the international currents,'' said Eduardo Gamarra, a Bolivian-born professor of polical science and director of the Latin American and Caribbean Center at Florida International University.
Miller, a Californian who first came to Bolivia in 1978, ran an Argentine company that in the late 1990s 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 into the economy.
Now, the dream is all but dead -- prompting Miller to abandon Pacific LNG.
''I essentially became frustrated and burned out,'' he said.