VZCZCXYZ0000
PP RUEHWEB

DE RUEHLP #1129/01 1161640
ZNR UUUUU ZZH
P 261640Z APR 06
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 8985
INFO RUEHAC/AMEMBASSY ASUNCION 5791
RUEHBO/AMEMBASSY BOGOTA 3081
RUEHBR/AMEMBASSY BRASILIA 6944
RUEHBU/AMEMBASSY BUENOS AIRES 4187
RUEHCV/AMEMBASSY CARACAS 1487
RUEHPE/AMEMBASSY LIMA 1451
RUEHMN/AMEMBASSY MONTEVIDEO 3740
RUEHQT/AMEMBASSY QUITO 4127
RUEHSG/AMEMBASSY SANTIAGO 8672
RHEHNSC/NSC WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 001129 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND 
TREASURY FOR SGOOCH 
ENERGY FOR CDAY AND SLADISLAW 
 
E.O. 12958: N/A 
TAGS: ECON EINV ENRG EPET PGOV BL
SUBJECT: BOLIVIA AND ARGENTINA SIGN ENERGY DECLARATION 
 
REF: A. LA PAZ 1107 
 
     ¶B. LA PAZ 1114 
 
¶1. (SBU) Summary:  On April 21, Bolivia and Argentina signed 
an Energy Integration Declaration in La Paz, promising to 
revise the natural gas sales agreement between the two 
countries, including provisions on price and export volumes, 
create a partnership between both countries' state oil 
companies, and promote the industrialization of Bolivian gas. 
 According to Tarija Senator Roberto Ruiz and Petrobras 
contacts, the declaration was more rhetoric than substance, 
and Bolivia will have a tough road ahead to achieve the gas 
price increases that it desires from Argentina.  Argentine 
Embassy contacts confirmed that the price negotiations will 
be difficult, but were pleased by the GOB's positive change 
of tone towards Argentina.  Ruiz expressed concern about the 
GOB's inconsistent statements about the sector and the future 
of Bolivia's relationship with both Argentina and Brazil. 
End summary. 
 
¶2. (SBU) On April 21, Bolivian Hydrocarbons Minister Andres 
Soliz Rada and Argentine Planning Minister Julio De Vido 
signed an Energy Integration Declaration in La Paz. 
According to a copy of the Declaration provided to us by the 
Bolivian Hydrocarbons Chamber, Argentina and Bolivia agreed 
to revise the natural gas sales agreement signed by the two 
nations in April 2004, including articles on price and supply 
conditions, by May 15.  According to Argentine Embassy 
contacts, the sales agreement expired in March 2006, and thus 
the decision to "renegotiate" it was not a new development. 
 
¶3. (SBU) On supply, they agreed to sign the necessary 
agreements to move forward on the construction of a pipeline 
to Northeast Argentina (GNEA) and revise the gas sales 
agreement to include larger gas export volumes.  (Note: 
Bolivia currently exports approximately 5 million cubic 
meters per day to Argentina.  Argentina has expressed 
interest in increasing that figure to 20 million cubic meters 
per day.  However, higher export volumes are not possible 
without additional investment in Bolivia's hydrocarbons 
sector, because the companies are already producing at full 
capacity.  Investment has been frozen for the past year.  End 
note.)  They also agreed that future gas sales transactions 
would be handled by YPFB (Bolivian state oil company) and 
ENARSA (Argentine state oil company).  In addition, they 
agreed to found binational enterprises to promote the 
industrialization of Bolivian gas and the training of human 
resources and a bilateral commission to work on the above 
tasks. 
 
¶4. (SBU) In an April 25 meeting, Tarija Senator Roberto Ruiz, 
President of the Senate Economic Development Commission, told 
Econoffs that, despite the GOB's and press' portrayal of the 
declaration as a great success, the GOB and Argentine 
delegation achieved no concrete agreements.  According to 
Ruiz, and contacts from the Brazilian company Petrobras (ref 
A), GOB price negotiations with Argentina are not going well. 
 Ruiz, who as President of Tarija's Civic Committee played an 
instrumental role in sealing the 2004 gas sales agreement 
between Argentina and Bolivia, expressed concern about the 
negative trend in relations between the GOB and both 
Argentina and Brazil.  He explained that Bolivia only 
provides about 5% of Argentina's gas, with the rest coming 
from domestic sources.  He added that Argentina has a price 
freeze in effect that has made domestic gas significantly 
cheaper than Bolivian imports, and thus, Argentina would be 
reluctant to agree to much of a price increase with Bolivia. 
On the other hand, the price freeze has diminished investment 
in Argentina and increased their need for importing gas. 
Argentine Embassy contacts explained that Argentina currently 
pays around USD 3.20 per MCF for Bolivian gas, while the 
domestic price is frozen at USD 0.90 per MCF.  Argentine 
Embassy contacts speculated that Argentina may accept a price 
increase of USD 0.30 to O.80, but not more.  Embassy contacts 
agreed with Ruiz that the price negotiations would be 
 
difficult, but were pleased, at least, that the GOB appears 
to have softened its tone towards Argentina, after Minister 
Soliz Rada's ranting against President Kirchner earlier in 
the month. 
 
¶5. (SBU) Ruiz said that the Senate Economic Development 
Commission had questioned Bolivian Hydrocarbons Minister 
Soliz Rada on three occasions, during which Soliz Rada 
demonstrated his complete ignorance of the hydrocarbons 
sector.  Ruiz stated that he was bothered by the GOB's 
inconsistent statements about the sector.  For example, 
President Morales said that the GOB would be "partners" with 
the oil companies, while Minister of the Presidency Juan 
Ramon Quintana said that the oil companies would be mere 
"service providers" and not "partners."  Vice President 
Garcia Linera met with the Prefect of Tarija and promised to 
respect the Bolivian law which allows prefects to develop 
their own gas projects, but contradicted his promise two days 
later, Ruiz said.  He also expressed concern about the GOB's 
role in promoting the Chaco movement to secede from Tarija 
and form a 10th department (ref B), stating that the central 
government wanted to gain control over Tarija's gas reserves. 
 
GREENLEE