The Bolivian government expects investment ratios to be60% state and 40% private
A regional powerhouse-to-be
TOGY talks to Claudia Cronenbold, president of the Bolivian Chamber of Hydrocarbons and Energy, about the role of the private sector in Bolivia particularly as the country pushes to become a regional energy centre. The Bolivian Chamber of Hydrocarbons and Energy (CBHE) represents Bolivian companies across the complete value-chain of the energy industry. The chamber was established in Santa Cruz de la Sierra in 1986 with 15 founding members.
In 2017, will the Chamber be supporting the government’s plan to turn Bolivia into a regional powerhouse?
The Chamber gathers the whole private sector in hydrocarbons and energy. Our main goal is to promote constant dialogue so conditions are better suited to attract investors and growth. There is a plan by the government to turn Bolivia into the energy core of the region. We are preparing from the services area, looking to be strategic partners in this goal – a goal which we seek to contribute to with our analysis and vision of the projects and the regulations required to promote the sector’s development.
During these times of low prices, what are the Chamber’s views on what the government needs to do to promote the industry?
The energy industry is going through a deep transformation worldwide. This long period of low prices has created difficulties for the whole sector. Investments have fallen on a global level, projects are not generating the same cash flow; resource management and optimising investment projects have become key.
Within that scheme, companies are aiming to lower costs and optimise processes. The government has been working along those lines: it issued three decrees that help limit the duties, fix the deadlines and clear the process to get environmental licenses, prior consultation and participation. This serves to increase cost and timeline predictability, and to have better information about the expectations for compensations in indigenous areas. People have better estimations about what is reasonable to demand. We are walking together, looking for that exit in this new general situation where we can find an equation that allows both investment and the projects’ profitability.
One of the government’s projects is to increase reserves. How do you think the private sector can help the government achieve this significant goal?
Since the referendum we had, the state has taken on the main role in the exploration and production sector, since this is considered a strategic sector. YPFB’s leading role in this mission is very important and it has been a state decision that makes possible the participation of the private sector through services contracts for exploration and production. We think private participation is paramount, because it helps to share risks, to tackle more projects, and to share expenses. The government’s investment expectations are 60% state, 40% private, and this will be the future trend.
The CBHE has a strategic role to guide policies and create an atmosphere of open dialogue during this dynamic context. What areas have you helped the government with specifically?
More than helping, this is an exchange of views where we aim for the private sector’s views to be considered at the time of making policies and laws. We have actively participated with the Ministry of Hydrocarbons and Energy’s different areas in these decrees, in the identification of chances for improvement. There is an investment law that allowed for some incentives and we have expressed our preferences. We have presented lots of options, and showed the impact of these regulations, and the government has taken their decision after looking at their own set of analyses.
Do you perceive the institutional realm to be receptive to dialogue and to discussing these matters in forums?
Yes, we have very good dialogue with the Ministry of Hydrocarbons and Energy with very constructive meetings.
Another challenge to consider is the interconnectivity that helps lower costs within the industry. What’s the significance of logistics to empowering Bolivia’s energy future?
Logistics is 100% state-dependent. There are no private companies in the hydrocarbons logistics sector. The existing infrastructure is being used at full capacity. Any expansion in production or sales would require further investments.
What is the importance of Brazil and Argentina for bringing capital to the infrastructure sector?
The existing pipe infrastructure with Brazil will leave very competitive rates once the contract expires, because the invested capital has been written off after 18-20 years. We will have very competitive rates for transportation and this is a definite edge for both countries in their negotiation. Currently, the country’s regulatory and political frame doesn’t allow private investment in this strategic area. We could only invest by partnering up with a state company, which would have the majority of shares and the facility’s control.
In downstream, there is a new polypropylene plant opening up, the urea plant and there is an emphasis on LNG processing infrastructure. What is the private sector’s view on these developments and what opportunities do they provide in the short-term?
We have no agents in that sector, that is 100% state-run. In the short and mid-term there are opportunities to utilise the advantages these developments bring to develop investments that manage to capture them. We have organised events with the Commerce and Industry Chamber of Santa Cruz to provide information to business owners in general about the opportunities these projects are bringing for everyone, how they can impact agro-industry performance and what are the possible investments to take advantage of in these upcoming projects. There is room for improvement and a greater level of clarity in the area of commercial policies and in clarifying what the advantages are so as to attract investments.
Besides those forums, are there any other schemes you use throw light on the private sector’s concerns?
We have organised forums, and we have an annual congress. We have invited YPFB’s Projects Manager and a petrochemicals specialist from Argentina with great experience of the market, and we have great attendance of business owners. The ministry had its own initiative in Tarija that we supported, trying to inform business owners so they can use these opportunities.
What’s your vision for the next three to five years in the hydrocarbons industry and associated investment opportunities in all areas of the value chain?
We are in the middle of an important negotiation with Brazil that should be closed in the next two years. Its outcome will define an important horizon for investments. Our main challenge now is that Bolivia has reached 60 mcm per day production while the projects for industrialisation and the maintenance of current contracts require the incorporation of important reserves. Making exploration investments possible, and growing as far as these plans require, are our main goals as a sector.
These last few years we have gone through a critical point, many services companies have gone through important financial difficulties and company layoffs and we are concerned with keeping the capacity we currently have as an industry for project execution – and expanding it.
To find out more about the Bolvian Chamber of Hydrocarbons and Energy, click here.