Forecast: Bolivian Oil Fields to Be Depleted in 5 Years

La Razón, La Paz, 14-Jan-2011: Private oil companies that operate in Bolivia warn that, at the current rate of decline of the country's oil fields, crude oil production will be depleted within five years. Low yield is causing Bolivia to become more dependent on importing fuels.

Ten years ago, the oil fields which, along with other older fields, contributed 90.1% of national liquids production, were Río Grande, Víbora, Vuelta Grande, Bulo Bulo, Patujusal, Los Cusis and Sirari. Production in these fields has dropped to 28.7% today.

"As a result of decades of extraction, none of the purely petroleum fields produce today what they produced in 2002 (...). At this rhythm of decline in these fields, production will have been depleted in five or six years," according to a report by the Bolivian Chamber of Hydrocarbons and Energy (CHBE).

According to data from (government-run oil company) Yacimiento Petrolíferos Fiscales Bolivianos (YPFB), since 2006 the production of crude has fallen by 51.4% and production of condensate by 3.64%.

Liquids. Production has fallen to 20,000 Bbld (barrels per day) in 35 declining fields but this was compensated for in a "timely" manner by an increase in the production of condensate associated with the extraction of natural gas in fields that were discovered over a decade ago: Sábalo, San Alberto and Margarita (27,000 Bbld) according to the report.

"Today the production of liquids is dangerously concentrated in three fields (...) The growing dependence upon these producing fields exposes the country's exports, income, and economic and fiscal health to possible causes for alarm due to reductions or cuts in production (...) or to the eventual decline in their production", warns the CBHE.

According to the state-owned oil company, in 2010 the acquisition of petroleum condensate represented 69% of national production of liquid hydrocarbons. However, it produces significantly smaller amounts of diesel and gasoline, which is very inferior to that which can be obtained from crude oil. The diesel content in crude is 75% while in condensate it is only 14%.

"The marked decline of these oil fields makes the need for strong and continuous investment in new exploratory areas essential in order to increase the production of liquids and reduce the high levels of dependency of importing fuels and exporting natural gas".

Incentives. In 2002 thirty exploratory wells were drilled by the sector, none in 2009 and four in 2010. This year YPFB Corporación will drill 15 wells and invest US$351 million in this activity; in 2010 it invested US$17 million.

The lack of new markets to justify investing in this area and the "uncertainty" generated by the current debate regarding modifications to the legal framework for this sector have caused investments in exploration to dry up since 2002. Today, "the Government is attempting to motivate exploration, but has still not established the mechanisms necessary to do so," sustains the CBHE.

In addition, oil companies only make US$10.29 in profit per barrel, while the international price per barrel is near US$90.00. Decree 0748 was meant to motivate the sector by increasing the cost per barrel but the measure, as well as the creation of a Petroleum Incentives Fund, was annulled when the decree was revoked.

La Razón attempted to communicate with the President of YPFB, Carlos Villegas, but the Communications Unit reported the executive had traveled and no other executive could provide official information.

YPFB Chaco will drill two wells

The president of YPFB Chaco, Pedro Torquemada, reported that this year the company has an "initial" exploration budget of US$82 million, which includes funding to drill two wells (in Chuquisaca and in Cochabamba). Each well will cost an estimated US$15 million.

3D Seismic Study
The company will also carry out a 3D seismic study in the area of Chimoré (Cochabamba). It will invest US$1 million to obtain the socio-environmental licenses necessary to do so and up to US$35 million in operations in the sector, where there are indications oil may be found.

Guillermo Torres Orías
Prices per barrel of crude must increase

If Bolivia wishes to become self-sufficient and not depend on imported fuels, exploration must be directed at non-traditional areas of the country (La Paz, Beni and Pando), which is difficult to do, due to the absence of infrastructure and the high investment risk, given the lack of knowledge on the geology of these areas.

Reimbursing investments to companies that successfully find petroleum resources promotes exploration, but is not sufficient to motivate companies to risk entering Bolivia again.

In addition to this, the Government must increase the prices of petroleum per barrel in the domestic market to a value near international prices and, primarily, must modify the articles of the Constitution that are 'obstacles' and discourage foreign investment in the country and this, it must be acknowledged, seems insurmountable.

However, the ownership of hydrocarbons production (which is now completely in the hands of the state) must be debated in order to find ways for foreign oil companies to participate, while seeking mechanisms to safeguard the country's energy security.

Over the next five years, the production of crude, currently above 4000 barrels per day, will decrease to just over 1000 because the country as a whole consumes over 40,000 barrels per day. This will make it necessary to import more liquids, which as a result, will have consequences for the economy.

Guillermo Torres Orías, Former Minister of Hydrocarbons

Source: La Razón - Date: 14-Jan-2011 - Read this Article in Spanish

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