Bolivia Oil and Gas Report

The new Bolivia Oil & Gas Report from BMI forecasts that the country will account for 0.70% of Latin American regional oil demand by 2013, while providing 0.60% of supply. Latin America regional oil use of 6.93mn barrels per day (b/d) in 2001 reached 7.95mn b/d in 2008. It should average 7.71mn b/d in 2009 and then rise to around 8.46mn b/d by 2013. Regional oil production was 10.30mn b/d in 2001, and in 2008 averaged 9.85mn b/d. It is set to rise to 10.58mn b/d by 2013. Oil exports are slipping, because demand growth is exceeding the pace of supply expansion. In 2001, the region was exporting an average 3.37mn b/d. This total had fallen to 1.90mn b/d in 2008 and is forecast to be 2.13mn b/d in 2013. The principal exporters will be Mexico, Venezuela, Ecuador and Brazil.

In terms of natural gas, the region in 2008 consumed 205.6bn cubic metres (bcm), with demand of 243.6bcm targeted for 2013, representing 18.2% growth. Production of 212.3bcm in 2008 should reach 280.4bcm in 2013, and implies 36.8bcm of net exports the end of the period. Bolivia's share of gas consumption in 2008 was 1.26%, while its share of production was 6.55%. By 2013, its share of gas consumption is forecast to be 1.25%, with the country accounting for 7.12% of supply.

For 2009 as a whole, we are now assuming an average OPEC basket price of US$55.00 per barrel (bbl), a 41.5% decline year-on-year (y-o-y). This represents an upgrade from the US$52 forecast we have stuck with during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals and Dubai prices of US$56.30, US$57.50, US$55.60 and US$55.60/bbl respectively. For 2010, we expect to see a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gaining further ground to US$65.00 in 2011 and to US$70.00/bbl in 2012. Our post-2010 forecasts are unchanged and we are continuing to use a long-term price assumption of US$70.00 for 2013-2018.

In 2009, BMI is now assuming a global average gasoline price of US$62.12/bbl, with the fuel having peaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The BMI gasoil forecast is for an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The fullyear outturn represents a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast to be US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put by BMI at US$49.06/bbl, down 43.9% from the previous year's level.

Bolivian real GDP growth is now forecast by BMI at just 0.8% for 2009, down from 5.7% in 2008. We are assuming average annual 3.3% growth in 2010- 2013. There is increasing state control of oil and gas operations, thanks to government policy that supports re-nationalisation. This means that the burden of development falls heavily on state-owned Yacimientos Petrol?-feros Fiscales Bolivianos (YPFB) and its few remaining international oil company (IOC) partners. We are assuming oil and gas liquids production of no more than 64,000b/d by 2013, and the country is expected to pump 58,000b/d in 2009.

Consumption beyond 2009 is forecast to increase by around 2.0%-3.0% per annum to 2013, implying demand of 59,000b/d by the end of the forecast period.

Between 2008 and 2018, we are forecasting an increase in Bolivian oil production of just 2.82%, with crude volumes peaking in 2011/12 at 65,000b/d, before falling steadily to 58,000b/d by the end of the 10- year forecast period. Oil consumption between 2008 and 2018 is set to increase by 18.41%, with growth slowing to an assumed 2.0% per annum towards the end of the period and the country using 66,000 b/d by 2018. Gas production is expected to rise gradually, from 13.9bcm in 2008 to a peak of 20.0bcm in 2013/14, before slipping back to 18.4bcm by 2018. With demand growth of 42.33%, this provides export potential falling from a forecast peak of 16.9bcm in 2013 to 14.7bcm by 2018. Details of BMI's 10-year forecasts can be found in the appendix to this report.

Bolivia now shares seventh place with Ecuador in BMI's Upstream Business Environment rating, four points behind Argentina but well ahead of Mexico. Its proven gas resources and gas reserves-toproduction ratio (RPR) work in the country's favour, but are undermined by the state's renewed control of assets, deteriorating licensing regime and generally unappealing risk environment. The country is at the foot of the league table in BMI's updated Downstream Business Environment rating, reflecting its statecontrolled refining and marketing segment, modest capacity and less competitive environment, offset by a relatively low level of retail site intensity and the country's gas self-sufficiency. Ecuador is immediately ahead of Bolivia in the regional rankings, but a wide gap exists between the two that is unlikely to be bridged by Bolivia at any point in the near future.