Economy & Business - July 2003

The other big deal involving Bolivian gas is the long-gestated deal to export gas, via LNG ships, to Mexico and the US. The idea is that the gas from Tarija will be used to fuel power stations on the Pacific coast. The opponents of this deal claim that the wellhead price of the gas will be only US$0.70 per million BTUs. Some extreme nationalists claim that actually the government will get only 18% of this (ie, US$0.126 per million BTUs). 

This looks to be an underestimate. Although North American gas prices have come down from US$6.5 per million BTUs in March, the price has bounced up from the low of US$4.59 per million BTU in April. The current price is now about US$5 per million BTUs. 

If these prices hold, it would seem that the Bolivian wellhead price will probably be about US$2 per million BTUs because the cost of compressing, transporting and liquefying the gas is likely to be about US$2.45 per million BTUs. 

Sempra Energy, the ultimate buyer of the Bolivian gas, said that it does not want fixed prices: it would prefer to link the price to an index of hydrocarbon and energy prices.

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