Andean Group - January 2011 (ISSN 1741-4466)

Following the repeal of Decree 748, Morales is considering alternative incentives to boost oil output. With the option of raising oil prices not altogether ruled out, Carlos Villegas, the YPFB president has said that the government is now offering to reimburse 100% of the cost of successful exploratory drilling by private oil and natural gas companies. He said most of the companies that operate in Bolivia had accepted the proposal, which is especially aimed at incentivizing the search for liquid hydrocarbons - the need for which was highlighted by the Bolivian chamber of hydrocarbons and energy which at the end of last year, warned that “liquid" hydrocarbon production in the country's fields has collapsed from 90% to 28% in the last ten years. Most oil firms in Bolivia operate natural gas fields, which only produce liquid oil fuel as a derivative. Liquid oil fuel production from gas fields has a much lower yield than from oil fields. More generally, Villegas said that YPFB and private companies will invest US$812m in oil exploration and exploitation projects in 2011. With the government already seeking to boost exploration activity in light of the recent uncertainty over its gas reserves [RA-10-10], Villegas added that the YPFB is planning to invest in 15 exploratory wells (up from the initial ten mentioned in November), 26 production facilities and 14 perforation facilities.

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