The continuing decline in Bolivia's gas reserves, along with its exports to Brazil and Argentina, raises crucial questions about energy alternatives for Brazilian industry and the so-called "neo-industrialization" ambition.
Under the initial natural gas supply contract with state-controlled Petrobras, Bolivia is expected to deliver 30mn m³/d to Brazil. But the Brazil-Boliviapipeline, which started operations in 1999, was transporting less than 13mn m³/d as of July, according to regulator ANP. This has prompted Brazilian gas pipeline operator TBG to open a tender on 20 September to acquire gas from a third party to balance the system.
Petrobras officials plan to visit Bolivia "to assess if there is anything that Petrobras, by intervening, can help increase the gas supply to Brazil," said Mauricio Tolmasquim, executive director of Energy Transition and Sustainability at Petrobras. But that does not mean Brazil is facing a supply problem, he said.
"LNG is available worldwide, and there are other sources of supply," Tolmasquim said. "Still, it is in our interest to maximize the use of the existing pipeline."
The Bolivia visit may have a wider agenda, as Petrobras is ready to explore further opportunities beyond gas, but Tolmasquim did not share any other details.
The nationalization of Bolivia's hydrocarbon sector in 2006 has become significant for Brazil, leading to negotiations and disputes between the two countries.
As Bolivia's supplies decline, Brazil's demand continues to grow, topping 63mn m³/d compared with 47mn m³/d of domestic supply, as of January according to mines and energy ministry data. That means Bolivia was supplying just one-third of Brazilian demand.
Despite Petrobras' public optimism about boosting Bolivian supply, gas projects there are too small to satiate Brazilian demand, consultancy Gas Energy's director Alvaro Rios said. By 2029, Bolivia likely will have only enough production for its domestic market. The future of Brazil's gas supply through that pipeline hinges on Argentina's Vaca Muerta formation, on the outskirts of Buenos Aires. This marks a reversal of the northern gas line that previously transported Bolivian gas to Argentina.
Brazil's industrial sector in the south, along the TBG pipeline, is one of the hardest hit areas by the supply crunch because of low levels of competition and higher gas prices. Gas-using industries include ceramics, pulp and paper, food, glass, metallurgy, steel and chemicals.
"The weight of natural gas in manufacturing costs can reach up to 20pc of operating expenses," said Rennaly Sousa, energy specialist at Brazilian industrial trade group CNI.
The Bolivia-Brazil gas pipeline moves via Santa Cruz de la Sierra into Brazil, running through five different states in the midwest, southeast and south regions. Those will be the most affected by reduced flows, said Ieda Gomes, a consultant at FGV Energy.
Consumers' expectations for better supply are centered around the start up of the Rota 3 gas pipeline in 2024, providing an additional 18mn m³/d of production from area BM-C-33 in the Campos basin and from the Sergipe Deep Waters project. But Gomes questions the adequacy of gas pipeline capacity in Sao Paulo, where Rota 3 will connect with the existing system, and its ability to accommodate new volumes.
