Bolivia refuses to lower gas export prices, quotas to Brazil

<a href=ogj.pennnet.com>Oil & Gas Journal By an OGJ correspondent

RIO DE JANEIRO, Apr. 28 -- At a meeting Monday, Brazilian President Luiz Inácio Lula da Silva failed to convince Bolivia's President Gonzalo Sánchez de Lozada to revise the contract under which Brazil imports a fixed quota of gas from its neighbor.

"It is very unlikely that Bolivia will distance itself from what was agreed (with Brazil) in good faith in the past. It is unlikely that we will change the take-or-pay clause of the contract," said Lozada.

However, Brazilian Energy Minister Dilma Rousseff, who also took part in the talks, declared, "Brazil will only increase the volume of gas imported from Bolivia if the price of the fuel is reduced."

Brazil wanted to revise the take-or-pay clause in the import contract signed with Bolivia in 1996. Under that agreement, Brazil pays for a certain quota of imported Bolivian gas even if it does not need to import the fuel. Brazilian officials claim the take-or-pay provision will cost Brazil more than the present $150 million/year.

The minimum gas quota Brazil agreed to import from Bolivia is 14 million cu m/d. Under the agreement, the minimum quota would be boosted to 18 million cu m/d by 2004.

However, Brazil currently demands only 11 million cu m/d.The Brazilian economy is undergoing a severe recession, and it is unlikely that Brazil's gas consumption will increase from present levels for at least the next 2 years, said local analysts. Moreover, Lula's administration shelved the ambitious gas fired thermoelectric plants project devised by former President Fernando Henrique Cardoso.

Brazilian officials said the price of imported Bolivian gas has dampened Brazil's demand for the commodity. However, Lozada rejected the possibility of reducing gas prices without Brazil increasing imports.

A source in Brazil's foreign ministry told OGJ Online that he was not surprised with Lozada's position since Bolivia's president heads one of Latin America's most nationalistic and poorest countries.

Bolivia's natural gas reserves are estimated at 52 tcf, second in Latin America behind Venezuela. Bolivia's economy depends heavily on its gas sales, the source said. In addition, Losada faces strong opposition from powerful left wing factions in Bolivia who oppose lowering prices of exported gas.