Bolivia oil n gas — try try again

Bolivia President Evo Morales, burned in his attempt to rationalize gasoline and diesel prices, is now trying to find a new way to increase oil exploration in his territory. Plan A, of having a joint venture with PDVSA that would drill in previously unexplored areas such as the area around La Paz, hasn’t worked out. According to this Mercopress story, he’s gone to a Plan B that’s about as different as can be: fund private companies’ exploration costs, eliminating downside risk, while taking some of the upside if they succeed.

Am I the only one who sees the possibility that an oil company could turn this into a jobs program for junior geologists? No risk? Really? I hope Mercopress has it wrong.

5 thoughts on “Bolivia oil n gas — try try again

  1. Nat

    Setty if nothing is found then the private company bears all the cost. Reimbursement is only given if oil is found.

  2. Patrick Samsung

    The other line is most telling also about the price the companies get for any oil they sell. The article says $10, I’ve heard $30 per barrel. Neither price though i would suggest is suffceint for an oil company to run their economics on and get a rat eof return above their threshhold. Projects in Bolivia will be ranked against other international projects by the likes of Repsol and i don’t doubt there are more attractive projects with better rates of returns.

    But this is an important step in increacing exploration. I hope the IOC’s go for it or it might swing back in the other direction.

    1. sapitosetty Post author

      Maybe, maybe not. Oil companies get less than that, net of taxes, from their joint ventures in Venezuela. If they are guaranteed $30 a barrel, even through downturns, that is plenty of money. Remember that Bolivia is a much nicer place to work than much of the world, and won’t require the kind of additional spending that’s needed in Nigeria, Siberia or offshore.

      1. Patrick Samsung

        true but those JV’s have the oil in the ground there in Venezuela, so they don’t need to take into account exploration costs, they don’t for the most part have to worry about drilling dry holes during exploration and development if its the heavy oil. Top quartile F&D costs are $17 per barrel (http://www.bg-group.com/InvestorRelations/Results/Documents/2010/BG_Q3-2010-Results-presentation.pdf slide 9 ) if you are spending that kind of money up front plus opex costs which could be another 10$/b these projects aren’t looking that great if you have to sell at 30.

        Costs may also be slightly higher as while the industry has been around in Bolivia for a while the support and service industry isn’t nearly as well developed as those places you mentioned.

        But i still think the main sticking point will how projects in Bolivia rank up against those in other countries on the projects table for the IOC companies.

        Keep up the good work though, long time reader, first time poster (i think)

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