2013-12-03 12:54:47 - New Energy market report from Business Monitor International: "Bolivia Oil & Gas Report Q1 2014"
Our current forecast calls for hydrocarbon production to continue its upward trajectory in Bolivia over the medium term; however, we are pricing in weakness toward the end of the decade. Namely, while the country's oil and gas sector has largely weathered broader concerns related to the business environment, the threat of resource nationalism remains a key risk, as does as fairly weak reserve outlook, encouraging a more tempered long-term outlook. Of the two hydrocarbons, we believe gas has a somewhat brighter future. While above-ground risks continues to weigh on our forecast to a certain extent, redevelopment of producing fields, upside potential from sites currently under appraisal, and increased investment into new exploration suggest greater growth potential. With regards to liquids,
while condensate volumes from gas production presents some upside potential, we hold a more cautious view, expecting output to ease over the long term.
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We highlight the following trends and developments in Bolivia's oil and gas sector:
* Bolivia is currently planning an audit of it oil and gas reserves, with an aim toward a notable increase in official figures. An upgrade may attract new interest and boost investment into the country's upstream. However, a downgrade - similar to the one that occurred in 2011 and saw official gas reserves reduced by more than one-third - could dampen interest in the country's gas potential.
* Officials are also increasingly looking at unconventional opportunities despite a small downgrade in technically recoverable shale gas resource estimates in the EIA's most recent report on unconventional opportunities. Stated owned Yacimientos Petroliferos Fiscales Bolivianos (YPFB) is reportedly holding discussions with Argentina's state owned YPF for the development shale gas.
* Notwithstanding persistent concerns regarding Bolivia's business environment, with government nationalisation in other sectors undermining the country's ability to attract foreign investment, the oil and gas sector has seen a moderate uptick in investment in recent quarters, underpinning our recent modest upward revisions to production growth. Steady progress on upstream deals with Gazprom, Total and YPF should see new funds directed toward exploration and production (E&P). Importantly, recent deals come after several licences went un-awarded after a December 2012 tender.
* We expect a robust expansion in natural gas over the medium term, forecasting average annual growth of 5.5% year-on-year (y-o-y) between 2013 and 2017. This will be driven by the development of existing fields with additional infrastructure, as well as gains from the ramp up of new fields that have recently come online. We see further upside from fields currently under appraisal that may soon be brought into production. Among the risks to our forecasts, aside from technical challenges, is the threat of deterioration in the country's business environment that could slow or delay planned upstream projects.
* However, toward the end of the decade, we expect gains in gas production to slow, forecasting average growth of 2.4% y-o-y between 2018 and 2022. While there is upside from new discoveries or the addition of new projects to the upstream project pipeline, falling output from maturing fields will need to be offset as depletion accelerates.
* Domestic gas consumption is set to expand at an average of 3.9% y-o-y between 2013 and 2022, eventually rising to a little under 4.0bcm by the end of our forecast period in 2022, with risks to the upside. At present, rising production volumes should allow Bolivia to meet both increased domestic demand as well as its export requirements to Brazil and Argentina. However, we highlight longer-term downside risks, as production growth slows toward the latter half of our forecast period, particularly if demand surprises to the upside.
* While liquids derived from increased gas production could support gains in oil production over the medium term, we maintain our more cautious long term outlook. Indeed, we forecast that declining volumes from mature oil fields will mean output of crude oil, NGLs and other liquids will fall to 66,700 barrels per day (b/d) by 2022, below demand which we expect reach around 80,000b/d by the same time.
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