Ciao!

Industrialize gas? (el gas no se vende)

Some of the opposition to Bolivia's gas exports pointed out that Bolivia should industrialize the gas in order to export a value-laden product. This is a good idea, of course. But industry experts keep pointing out that Bolivia has so much natural gas (enough to last 300 years or so) that it might as well export while it seeks to industrialize.

Of course, October's guerra del gas changed the ball game. Yesterday, it was announced that the best export option is now off the table. Sempra Energy won't (or can't) wait for a referendum to give it permission to buy Bolivian gas, it went shopping elsewhere.

Today, Bolivians learned that the only project to industrialize Bolivian gas (in San Marcos, near the Brazilian border) ended. The thermoelectric plant was never finished. After already investing almost $140 million into the project, the last investor in the project has officially pulled out — the risk is too high compared to the potential payoff.

In part, the energy market in Brazil (which was the intended market for the thermoelectric plant) shrunk, while its hydroelectric capacity increased. But the obvious fact about international markets — that export prices are dictated by supply & demand and that investment depends on risk factors — eluded many of the radical opponents to gas exports.

The old dictum is true: Be careful what you ask for.

El gas no se vende (although most Bolivians support gas exports according to every poll on the issue) is now a national reality. And one question still hasn't been asked: How long can Bolivia hold off exporting natural gas before alternative energy sources are discovered that make Bolivia's last/only major resource worthless?

Posted by Miguel at 12:51 PM