Brazil/Bolivia provisional agreement on natural gas

Brazil’ government owned oil giant Petrobras announced a provisional natural gas price understanding with Bolivia, based on the current contract. Bolivia is Brazil’s main supplier of natural gas.

According to a report from Brazil’s official news agency released Friday beginning October, Petrobras will pay for Bolivian natural gas 3.76 US dollars per million BTU up from 3.68 US dollars. Quarterly price “adjustments” will also be jointly considered by both sides.

Representatives from Petrobras and Bolivia’s government owned oil company, YPFB, so far have been unable to agree on term changes to the original contract that involves the daily supply of up to 26 million cubic meters of gas, equal to half Brazil’s domestic consumption.

Last May first the administration of President Evo Morales decided the nationalization of all Bolivian hydrocarbon resources, a major blow for Petrobras that holds a majority stake on gas reserves plus control over Bolivia’s two main oil refineries. Petrobras has insisted “it sees no need” to review the price adjustment mechanism in the original contract.

According to Petrobras, the price mechanism based on quarterly adjustments is referred to a basket of commodities’ prices in the international market. Petrobras and Bolivia signed the natural gas provision agreement in the mid nineties, effective until 2019.