Bolivia and Argentina are expected to announce on Thursday a deal on Bolivian gas that will raise prices by almost 50 per cent.
The agreement comes less than two months after Evo Morales, the Bolivian president, announced he would nationalise his country’s gas reserves, the second largest in the region, and said the state would determine export volumes and prices.
The timing looks calculated to boost Mr Morales’ allies in elections in Bolivia on Sunday to choose members of an assembly that will rewrite the constitution. The Bolivian president, who won a landslide victory last year, got a boost in the polls after he announced his nationalisation plan on May 1. But his approval ratings have slipped from 81 to 75 per cent in the past month, according to a recent poll by Apoyo, a respected pollster.
Under the agreement, the price of gas exported from Bolivia will jump from $3.35 (€2.67, £1.84) to $5 per million Btu. In return, Argentina is likely to secure a large increase in export volumes, from 6m cubic metres a day to 20m from 2009, when a new pipeline in northern Argentina is due to be completed.
Talks had foundered after Néstor Kirchner, the Argentine leader, admitted that Bolivian gas imports were effectively being re-exported to Chile. La Paz and Santiago severed diplomatic ties in 1978 over Chile’s refusal to grant Bolivia land for sea access. Mr Morales has been pushing for a clause stipulating that Bolivian gas will not be sent on to Chile.
The Morales administration now faces the potentially more thorny issue of negotiating a fresh agreement on exports to Brazil. Petrobras, the Brazilian state company, imports 26m cubic metres of natural gas a day from Bolivia at a price of $3.80 per million Btu.
Brazilian authorities have been keen to distance themselves from the deal with Argentina. Antonino Mena, Brazil’s ambassador in La Paz, said any agreement between Bolivia and Argentina “cannot be seen in any way as a reference point” for an eventual deal between Brasilia and La Paz.
Petrobras announced this week it would pay 10 per cent more for Bolivian gas from next month, but this is an automatic price adjustment unrelated to the negotiations with La Paz.
As part of the nationalisation plan, from Saturday Petrobras will no longer operate as a retail fuel distributor in Bolivia, as it has done since July 2001. All distribution will be run by YPFB, the Bolivian state-run energy company.
In an effort to show it can diversify its exports away from traditional markets if it cannot secure higher prices, Bolivia this month asked international companies to bid for a $2bn gas pipeline project aimed at exporting 20m cubic metres of gas a day to Paraguay.