Overcoming barriers to investment in the A view from the Southern Cone The George Washington University Washington D.C.

March - 2002

Scenario

Since Bolivia is a gas exporting country, my gas transportation.

presentation aproaches the subject from the point of view of gas reserves and

WORLDWIDE NATURAL GAS RESERVES

37.89% 3.01%

4.73%

4.90% 6.91% 7.46% 35.10% Eastern Europe North America Middle East

Latin America

Africa Western Europe Far East

Source: OGJ Worldwide Production Reports 1-Jan-01 Bolivia De GOLYER & Mac Naughton January 2001

LATIN AMERICA: NATURAL GAS RESERVES

46.4 % 1.4% 1.2 % 2.2% 2.5% 9.6 % Venezuela Trinidad & Tobago Ecuador México Peru Chile 8.6% Argentina Brazil

17.3 %

4.2% 6.7%

Bolivia

Colombia

Source: OGJ Worldwide Production Reports 1-Jan-01 Bolivia De GOLYER & Mac Naughton January 2001

Natural Gas : Certified Reserves in South America Country TCF Chile 4.4 Brasil Perú 8.0 13.3 Argentina 27.4 Bolivia 50.0 Venezuela 147.6 * TOTAL 250.7

% 1.8

3.2

5.3

10.9

20.0

58.8

100.0

Fuente: YPFB 5.69

6.62

8.58

32.21

46.83

50.00

Growth since 1997

800%

Inversión Total 5 –6 billones de US$

West Coast Australia 9,900 Millas naúticas Islas Sakhalin 4,000 Millas naúticas

S.A. Hydrocarbon Position

Venezuela Colombia Guyana Ecuador Bolivia Argentina Peru Chile Paraguay Uruguay Brazil Exporter Oil Yes Yes Yes Yes Gas Yes Yes Yes Yes Yes Oil Yes Importer Gas Yes Yes Yes Yes Yes Yes Yes Yes Yes

Hydrocarbon Supply and Demand

Hydrocarbon importing countries in S.A. purchase their oil requirements from Venezuela, Colombia or Ecuador.

Brazil is the only country with major purchases from the international market.

Gas is exported from Bolivia and Argentina Conclusion: S.A is capable of supplying its hydrocarbon needs with significant export surpluses

Mexico – U.S.A.

interconnections

Transportation System Existing International Gas Pipelines

Cuiabá Bolivia - Brasil

International Gas Pipelines Atacama NorAndino GasAndes Pacífico Methanex

International Gas Pipelines Uruguaiana

Colombia - Venezuela Mexico – Itsmo Centroamericano De la Integración Bolivia - Chile Projected Gas Pipelines Bolivia - Paraguay

.

Transportation System

Conclusion: To have a free flow of energy among the countries it is necessary to promote the physical integration of gas pipelines.

Investments in physical integration will encourage the energy integration in the region

To overcome the Investment barriers

The investing Corporation needs:

•

Significant hydrocarbon potential

•

Reasonable Infrastructure

•

Stable Laws of Hydrocarbon

•

Political stability

•

Contract and Tax stability

•

Reasonable Return on the Investment

•

Acceptable Environmental Laws

•

Compatible Regulations

To overcome the Investment barriers

The host country needs:

•

Technical and Financial Capabilities

•

Parent company guarantees

•

Government take between 35-50%

•

Surtax inclusion

•

Apply country regulatory system

•

Apply country environmental Law

•

Accept and recognize social needs of the people

Obstacles to investment

The absence of compatible regulations as well as the disparity of legal and institutional frameworks Restrictions of different hydrocarbons laws Bolivia, Law 1689 Transfers UPSTREAM activities to investment through joint venture contracts.

private Establishes a transparent process nomination of exploration areas.

for the Eliminates any restrictions for the import, export and domestic marketing of hydrocarbons and its byproducts.

Opens DOWNSTREAM investment.

activities to private sector

Obstacles to investment

Restrictions of different hydrocarbons law Mexico Exploration, Exploitation and Marketing are activities reserved to the State Transport, Storage and Distribution: activities open to private investment Construction, operation ownership of systems.

Marketing, exports and imports and Open access to the pipeline system

A comparison between two approaches

Two political trends clearly defined coexist in Latin America:

State Oil companies, that increase their participation in the economy

Brazil, Mexico,Venezuela and Ecuador Increased their revenues due to the high oil prices

A comparison between two approaches

Two political trends clearly defined coexist in Latin America:

Countries where privatization of state owned companies took place

Argentina, Bolivia and Peru Increase in last five years the investment in exploration and exploitation over the

Protection of the land

Indigenous Territories Protected Areas Exploration & Exploitation Approximately 40% , 420.000

sq km, of Bolivia´s territory is closed for investment

Terrorism Colombian case

The Caño Limon oil pipeline, 230.000 bpd of capacity, runs 780 kilometres from Colombian's oil fields north-eastern Arauca department, near Venezuelan border, to the port of Coveñas Caño Limon is jointly operated by Colombian state oil company Ecopetrol and the U.S. oil company Occidental Petroleum

Terrorism

Since 1986 there has been 700 attacks again the pipeline which caused an overalll spillage of 2.2 million barrels of oil.

These attacks can be compared with the worst marine spills: 1967: 1978: 1989: Torrey Canyon off land´s end in England spilled 830,000 barrels.

Amoco Cadiz off the Brittany coast of France spilled 1.6

million barrels of oil.

Exxon Valdez in Alaska spilled 240,000 barrels.

Concluding remarks

To overcome barriers to private investment in energy it is crucial democracies.

to promote the sustainability of Equilibrium between an open market economy and the social responses to satisfy the needs of the countries.

Infrastrcture is required to continue with the process of integration thus making investments possible.

Concluding remarks

Terrorism is a barrier to which we do not have an answer today but it is related to education and to the understanding of a new social state of affairs in the world .

Concluding Remarks

The understanding of the major corporations of this new social state of affairs will help in overcoming the investment barriers in Latin America

www: energia.gov.bo

email: [email protected]

Protection of the land – Bolivian case Pipeline Bolivia - Brasil

Implementation of the Indigenous Development Plan (US$ 2 milllion) Participation in Trust Fund (US$ 1.7) the

Pipeline San Miguel – San Matías

Modification of the route to reduce the impact on the Chiquitano forest Indigenous Territories Protected Areas Implementation of the Indigenous Development Plan (US$ 2.0 million) Constitution of the foundation for the Chiquitano forest (US$ 20 million) * Program of reforestation *: OPIC’s requirement