Bolivia’s gas industry – A primer

By Bolivia Económica

Executive Summary

Bolivia has a long history with the oil and gas industry, with the country’s first liquids production commencing in 1925. Today production is dominated by gas, a commodity that has become vital to the country’s economy. Gas accounts for some 25-30% of the country’s export receipts and gas exports represent 6-7% of GDP. Moreover, the sector plays an important political and social role, with for example the incumbent president Evo Morales rising to power on his promise to nationalise the industry. Since his election in 2006, the country has succeeded in almost doubling production from 2004 levels and has effectively increased both exports and domestic gas consumption. However, with little incentive for IOCs to increase their exposure to Bolivia and YPFB already stretched with development and production expenditure, exploration has suffered from underinvestment, with proven reserves slowly declining as a result. Going forward, the interaction between the industry’s need for investment, fiscal pressure and strong, nationalistic sentiment will determine the course of Bolivia’s hydrocarbon industry.

Basic geology

Bolivia has a landmass of c.1.1m square kilometres. Broadly speaking the country is characterised by the Andes Mountains in the southwest, the Guaporé shield in the northwest and between them the Beni-Chaco plain. From a geological perspective, three discrete basins are recognised; Altiplano, Tarija and Madre de Dios. The latter comprises two sub-basins, the Beni Plain and Northern Sub-Andean zone, while Tarija comprises the Chaco Plain and the Southern Sub-Andean region. To date, the majority of exploration and production in Bolivia has been focused between Tarija and Santa Cruz in the Tarija basin, although there is some activity in the northern Sub-Andean basin.

Regulation and history

Natural gas has long played a significant role in driving Bolivia’s economy Bolivia, with for example gas exports accounting for some 6% of GDP in 2016. As with other industries in the country, the hydrocarbon industry has gone through a number of different regulatory regimes in the past with the industry nationalised and privatised on numerous occasions. Following the election of Evo Morales as president, the industry was re-nationalised in May 2006. The 2006 re-nationalisation programme gave state-owned Yacimientos Petroliferos Fiscales Boliviano (YPFB) exclusive management of the country’s hydrocarbon industry. Partnership with other companies is allowed, provided that YPFB maintains majority ownership of reserves. Moreover, partner profits are limited to a maximum of 50% of the value of production.


Bolivia awarded its first exploration contract to a British and American syndicate in 1910, with the county’s first significant discovery occurring in 1924 (Standard Oil). Since the 2006 renationalisation, all unlicensed exploration acreage is reserved for YPFB. Any foreign company wishing to take part in the exploration of Bolivia must enter into a service agreement with YPFB.

The most recent licencing round took place in 2012 and saw YPFB award exploration concessions to Petrobras (100k hectares in the Santa Cruz department) and BG Group (453k hectares in Chuquisaca and Tarija departments). Three further blocks put out to tender to the international community were not picked up at the time. While no further licencing rounds have taken place since 2012, changes to legislation in 2016 that aim to encourage exploration could see renewed interest in any future licencing rounds.

The government-led initiatives to try incentive foreign investment in the sector include the 2016 investment law no. 767 ‘Ley de Promoción de inversión en exploración y explotación hidrocarburífera’ which transfers 12% of IDH revenue to a special fund to reward companies that make large investments in the sector. The same law allows for the extension of production contracts for companies that are willing to invest a minimum of USD350m in exploration drilling or at least USD500m in exploration and production.


Gas production commenced in Bolivia in the 1960’s from the Camiri and Madrejones fields. The majority of the gas at the time was associated with gas and with no infrastructure in place, it was flared. Commercial production of gas commenced in 1972 with the start-up of exports to Argentina. Gas production averaged some 240mmcf/d up to 1999, at which point Bolivia signed a gas export contract with Brazil. This saw production steadily increase, with gas production averaging 1250mmcf/d between 2000 and 2017. The key producing fields are Colpa-Caranda, San Alberto, Sabalo, Itau, Incahuasi, Tacobo, Tajibo, Curiche and El Dorado. While YPFB accounts for the majority of Bolivia’s hydrocarbon production, a number of IOCs have remained in the country including Petrobras, Repsol, Total and Shell.


Bolivian gas production has increased by an average of 9.9%p.a. since 1997

Lower commodity prices of recent years have seen production decline somewhat, as companies focused on larger development outside of Bolivia. However, with exploration efforts expected to ramp up in the near future, market expectations are that Bolivia will succeed in improving gas production at least out to 2027.

Bolivia exports c.75-80% of its production to Argentina and Brazil, with the balance consumed domestically. Whilst the domestic market is expected to continue to grow and reach c700mmcf/d by 2025 (from its current 500mmcf/d), export markets will remain critical to the country’s gas markets. Argentina is expected to continue to import Bolivian gas in the medium term, with the completion of the Gasoducto Noreste Argentina pipeline (capacity c.700mmcf/d) by end 2018, likely to bolster volumes. However, in the long-term development of Argentina’s large shale gas play, Vaca Muerta, could pose a potential threat to Bolivian exports.

Elsewhere, Bolivia’s current Gas Sales Agreement (GSA) with Brazil is due to expire by end 2019. With Brazil’s domestic gas production much bolstered in recent years due to its huge success in the Santos basin, it is likely that should Brazil renew the GSA with Bolivia, it would have lower minimum take-or-pay volumes. This risk was highlighted in early 2017 when Petrobras announced it was halving off-take from Bolivia due to lower demand and higher domestic production. Bolivia is seeking to identify new export markets to offset any lost export volumes to Brazil, with Peru and Uruguay being identified as potential markets. A connection to the Southern Peru pipeline (under construction) and with the port of Montevideo in Uruguay would provide Bolivia with its longed-for access to ports on both sides of the continent, allowing it access to global gas markets.

Reserves and Resources

Estimates for Bolivia’s natural gas reserves at the end of 2017 range between 9.6TCF (BPs statistical Review) and 10.6TCF (EIA). While representing a rather modest 0.1% of global gas reserves, Bolivia is nonetheless the fifth largest holder of gas reserves in the South and Central American region. Reserves have significantly declined since the 2002 peak of 27.7TCF due primarily to 14.5TCF cut in reserves in 2009, following an independent review by US consultancy Ryder Scott. However, low levels of exploration investment at a time of increased gas production have also impacted.

BP data indicates Bolivia’s gas reserves have declined by an average 0.1% p.a. since 2009, while production has grown by an average 4.6% p.a. across the same period. However, exploration and production agreements signed in November 2017 with Repsol, Petrobras and Royal Dutch Shell aim to spend c.US$1.6 billion in efforts to increase the country’s natural gas reserves. In 2015 YPFB stated that it aims to boost Bolivia’s proven gas reserves to 11.5TCF by 2021 and to 18TCF by 2025.


Bolivia gas reserves 1980 – 2017 TCF


Bolivia holds 3.3% of gas reserves in South & Central America

Importantly YPFB considers Bolivia to be under-explored, with authorities estimating that 48% of the territory has hydrocarbons potential, the majority of which is undeveloped. The energy ministry anticipates discoveries of c. 300bcm to be made in the Tarija basin by 2022. More than 60 new areas will be targeted and YPFB has been approved to enter into contracts covering these prospects. Elsewhere, Sinochem was approved to conduct 2D seismic over a 3,068 square kilometre area targeting the Altiplano Norte region.

Possible upside to reserves also exists in the country’s shale gas potential. A 2013 EIA report estimated Bolivia’s technically recoverable shale gas resources to be c.36TCF and 0.6bn barrels of shale oil and condensate. YFPB announced in 2013 that it would initiate preliminary studies to establish the potential of shale gas and that an agreement would be signed with Argentine YPF, which similarly aims to develop its own cast unconventional shale resource. More recently in 2016, YPFB agreed with Paraguay to explore the Charagua region in the Santa Cruz department which is estimated to hold 2.7TCF of gas.


Bolivia’s gas transmission system is well developed with the country boasting over 5000km of pipelines to supply both the domestic and export market. The domestic market was historically geared toward the industrial and electricity markets; however, recent years has seen demand grow from the residential market. Many of the pipelines converge at the Rio Grande pipeline hub, where gas can then be diverted towards Brazil, Argentina or onto the domestic market. Key pipelines are outlined in the table below, while 2018 should see the inauguration of a new export route to Argentina via the 700mmcf/d Gasoducto Noroeste Argentina (GNEA) pipeline.


In 2001 Repsol YPF, BG and BP agreed to form the Pacific LNG consortium with the aim of investigating the possibility of utilising gas from their Caipipendi field to supply the US Pacific coast LNG market. The project was subsequently dissolved due to the politically sensitive choice of an export port in Chile, which at the time was the only economically feasible export route. The Bolivian government is still investigating the possibility of exporting LNG via Peru.

Broad fiscal terms

Since the enactment of Hydrocarbon Law no. 3058 in 2005, Bolivia operates a fiscal regime similar to a production sharing contract (PSC) system. An 18% royalty and a 32% Direct Tax on Hydrocarbons (IDH or Impuesto Directo a los Hidrocarburos) are imposed on the gross value of production at the wellhead. Cost recovery is then calculated, and the remaining profits are split between YPFB and the contractor. Following the profit split, operators must also pay corporation tax of 25%.

IDH is paid to the central Bolivian government while royalties are payable direct to the relevant hydrocarbon producing department.