Bolivia’s recent election just threw a curveball into its crucial natural gas sector! With production declining, new leaders are scrambling for solutions that could reshape energy ties with Argentina and Brazil. Will their strategies spark a gas boom or a bust? The stakes couldn’t be higher for the region’s energy future.

Bolivia stands at a pivotal juncture following its recent presidential election, poised to usher in a new era for its natural gas sector. The outcome holds profound implications for the nation’s energy policy and its vital commercial relationships with neighboring Argentina and Brazil. As the country grapples with a concerning decline in natural gas production, the new political leadership faces immense pressure to implement strategic initiatives that can reverse this trend and prevent a devastating drop in export capabilities over the next decade. This period of transition marks a critical moment for Bolivia’s economic future and regional energy dynamics.

The first round of the Bolivian presidential election on August 17 witnessed a historic shift, with the left-wing Movimiento al Socialismo (MAS) suffering a significant defeat after nearly two decades in power. Their nominee secured only about 3% of the vote, while right-leaning former president Jorge Quiroga garnered 27% and the more centrist Senator Rodrigo Paz obtained 32%. With a runoff scheduled for October 19, this clear move away from MAS’s long-standing dominance signals a likely transformation in the country’s energy policy, potentially redirecting the trajectory of the natural gas industry and its crucial connections with Argentina and Brazil.

Bolivia’s upstream sector, once a magnet for private investment in the 1990s, saw major international oil and gas companies contribute significantly to the increase in gas production. However, a significant policy shift in 2006 led to the nationalization of resources, placing the state-owned YPFB in charge of reserves and gas commercialization. Since 2014, Bolivia’s natural gas production has been on a downward spiral, raising concerns that the nation could become a net importer within the next ten years. Despite recent discoveries, the long-term outlook for gas production decline remains challenging, further evidenced by gas exports plummeting from 46.5% of total exports in 2014 to a mere 18.1% by 2024.

Both leading presidential candidates, Jorge Quiroga and Rodrigo Paz, have openly acknowledged the pressing concern surrounding Bolivia’s declining natural gas production within their campaign platforms. While both share the overarching objective of boosting gas output, their proposed methodologies for achieving this crucial goal diverge significantly. Their strategies reflect different economic philosophies regarding how best to incentivize growth and attract the necessary capital to revitalize the sector.

Quiroga’s proposal centers on providing direct subsidies to natural gas producers, aiming to stimulate increased production through financial incentives. In contrast, Paz advocates for a more multifaceted approach, combining legal and fiscal incentives with a reduction in existing subsidies. This strategic divergence highlights the complex policy choices facing the new administration. Furthermore, the regional landscape has shifted, with Argentina significantly reducing its imports from Bolivia since 2024 due to increased domestic production from its Vaca Muerta field, making Brazil an even more critical target market for Bolivian gas exports.

Additionally, Quiroga champions investment in renewable energy sources, recognizing that approximately 70% of Bolivia’s interconnected electricity generation currently relies on thermoelectric plants, primarily fueled by natural gas. This domestic demand for gas directly competes with export markets. By actively reducing internal gas consumption through the expansion of alternative energy sources, more natural gas would become available for lucrative export, providing a potential economic boost. Power demand has historically accounted for a substantial 40% to 50% of Bolivia’s overall domestic gas consumption, illustrating the significant potential for gas liberation.

Both presidential candidates have also proposed cutting subsidies in the domestic market, where natural gas is currently sold at a substantially lower price compared to export markets. For instance, over the last 12 months, Bolivia has sold gas to Petrobras in Brazil at prices ranging from $6 to $7 per MMBtu, while domestically, the price hovers around $1.0 to $1.4 per MMBtu. This stark disparity underscores the financial burden of current domestic pricing and the potential for increased revenue by realigning internal market values.

A core tenet of both Quiroga and Paz’s strategies is the ambition to significantly boost natural gas exports to Brazil and Argentina. Crucially, they aim to achieve this by improving the legal framework to attract essential foreign investment and to incrementally reverse the effects of the energy sector’s nationalization. By cultivating a stable and predictable business environment, they hope to encourage foreign firms to invest in developing the country’s energy reserves, thereby increasing gas production and exports. However, it is widely recognized that new upstream investments will require considerable time to materialize, particularly if located far from existing infrastructure. Despite the inherent risks and the understanding that success in exploration and production is not guaranteed, both candidates acknowledge that increasing gas production cannot be achieved solely with internal companies, making foreign capital vital.

The success of Bolivia’s efforts to ramp up gas production could have significant ripple effects across the region. For Argentina, with Vaca Muerta’s gas production expected to exceed domestic demand, securing new export markets is paramount. A more stable Bolivian gas sector could potentially offer a reliable transit route for Argentine gas to Brazil, though it might also intensify competition for export volumes due to the considerable distances from Vaca Muerta to Brazil, which entail additional costs. Meanwhile, for Brazil, a surge in Bolivian gas availability would significantly enhance supply security through the established Bolivia-Brazil pipeline, operated by Transportadora Brasileira Gasoduto Bolivia-Brasil (TBG). Furthermore, Nova Transportadora do Sudeste (NTS) and TBG have planned investments to upgrade their pipeline infrastructure, aiming to increase the capacity to transport pre-salt gas to the TBG grid, amidst declining Bolivian production. This potential increase in Bolivian gas supply could be strategically capitalized on by private agents in Brazil, who have already demonstrated a trend towards greater diversity in importing Bolivian gas, potentially fostering a more competitive and dynamic market environment within Brazil.