MercoPress. South Atlantic News Agency

Argentina, Bolivia sign US$17B deal

Under a new contract, Bolivia will increase exports to Argentina from the current maximum of 7.7 million cubic metres a day to 27.7 million cubic metres a day over a 20-year period beginning in 2010.

Bolivia and Brazil are locked in acrimonious talks over new prices. In late June, Argentina agreed to pay US$5 per million British thermal units (BTU) for the fuel ? or nearly 50 percent more than what it had been paying. Beginning next year, the price will be pegged to international fuel prices.

Morales hailed the agreement with Argentina as proof his nationalization drive is on track.

At current prices, Bolivia, South America's poorest country, stands to sell some US$17 billion worth of natural gas to Argentina by the time the new contract expires in 2030.

As part of the energy sector nationalization, oil and gas companies operating in Bolivia must negotiate new contracts handing the Bolivian government greater control of energy production and a larger share of profit.

Morales said the agreement was a key step toward greater regional economic integration among South American countries.

"Bolivia with YPFB, Argentina with Enarsa, Brazil with Petrobras. The dream we have is to really free our natural resources and use them to the benefit or our countries," he said.

Bolivia is home to the second-largest natural gas reserves in South America after Venezuela. Foreign oil companies in Bolivia include Brazil's state-owned energy company Petrobras, Spain's Repsol YPF, France's Total and British gas and oil producer BG Group Plc.

Federal Planning Minister Julio De Vido said that the price established in the deal is the same one agreed to in June, or US$5 per million BTUs.

"We have the reserves, but we need investments. I am encouraged and happy to hear ... (Argentina) is keen to invest and have access to Bolivia's natural gas,"

Bolivian President Evo Morales said in a speech at the signing of the agreement in the eastern city of Santa Cruz.

The move comes amid growing debate about Bolivia's ability to meet any new commitments for increased natural gas exports after Morales nationalized the country's energy sector in May.

Bolivian officials say the country's state energy company, YPFB, needs new investments worth US$800 million to fulfil new export deals, including the one with Argentina. Independent analysts estimate as much as US$1.2 billion is needed.

A YPFB statement said Argentina's state-owned energy company Enarsa will also make a joint investment with YPFB totalling US$1 billion to build a natural gas processing plant in Bolivia and a new pipeline to transport Bolivian gas to Argentina.

"Have no doubt that Argentina is going to help with the necessary investment," President Néstor Kirchner said at the ceremony.

Argentina is grappling with natural gas shortages, with demand surging as the economy averaged a sizzling nine percent annual growth rate since 2003. The Argentina-Bolivia deal could also affect Chile, which relies on natural gas imports from Argentina.

Bolivia has sought to raise gas prices to its biggest customers ? Argentina and Brazil ? who for years have enjoyed deals at below market values. Argentina is the second-largest buyer after Brazil, which has a contract to buy up to 30 million cubic metres of Bolivian natural gas a day at US$4 per million BTU. Buenos Aires Herald