Turf Dispute Mars Plan for Bolivia-California Gas Pipeline

This impoverished country’s best-known export could change from cocaine to energy in coming years, with California a chief beneficiary, unless politics and a century-old border dispute get in the way.

A consortium that includes international energy companies and San Diego-based Sempra Energy has proposed a $5-billion project to bring liquid natural gas from deep in the Bolivian jungle to California via a trans-Andean pipeline, a fleet of huge tankers and a Baja California terminal and pipeline.

But the pipeline route favored by the energy companies, linking the consortium’s Margarita gas field 200 miles south of here to the Pacific coast of Chile, has generated intense political opposition here.

Nationalist critics charge that any such deal would amount to a surrender of land that Chile seized from Bolivia at the end of the War of the Pacific in 1883. The territorial dispute has remained a thorn in their relations. Opponents prefer the pipeline to follow a northern path to the ocean through Peru.

The energy companies, however, say the additional 125 miles of pipeline necessary for a northern route would make the project unfeasible. There would also be higher financing costs associated with routing the pipeline through Peru, said Ed Miller, general director of British Gas, one of Sempra’s partners here.

“There is no other option than Chile,” Miller said in an interview in Santa Cruz, the center of Bolivia’s booming energy industry.

A decision by Bolivian President Jorge Quiroga was expected shortly after last Sunday’s presidential election. But the winner of that race is still in doubt, as is the congressional coalition that will wind up choosing a new president Aug. 6. Quiroga may leave the call to his successor, which would come after Sempra’s agreement with the gas field’s producers expires, freeing the consortium to seek gas elsewhere.

Bolivia is not the only energy-flush country anxious to fill California’s energy deficit. Australia, Indonesia and Russia all have huge amounts of surplus natural gas they would like to ship to the state. Three other Baja port-pipeline proposals have been made that would take in liquid natural gas from those countries and others.

A delay in the pipeline routing decision could cause Bolivia to lose the race to be part of a gas supply chain to deliver 15% of California’s gas needs, if it forces Sempra into the arms of another gas supplier. Bolivia’s annual share in the proceeds from annual gas sales to California could be about $600 million.

Sempra and the other companies pitching the projects, which include Royal Dutch/Shell, El Paso Corp. and Marathon Petroleum, are all vying to be the first to start construction on a gas terminal in Baja. They are waiting only for the Mexican government to finalize the permit process.

Although four such projects have been proposed, two at most are expected to be built, with the first one off the mark likely to enjoy a huge advantage in obtaining financing and accessing the market.

Liquid natural gas has been cooled to minus 160 degrees to reduce its volume and make it transportable. The liquid is then loaded onto vast tankers resembling giant thermos bottles and shipped to where demand is. Upon arrival, the liquid is stored, returned to a gaseous state and shipped via pipeline to consumers.

The proposal by Sempra, British Gas and other partners includes a gas terminal to be built about 60 miles down the Baja coastline south of the U.S.-Mexico border. The seven tankers in this project’s fleet would each be the size of a football field, cost $200 million and take three years to build.

Bolivia, which privatized its energy industry in 1996, is a major global storehouse of natural gas. Its 57 trillion cubic feet of proven gas reserves rank it second only to Venezuela in South America.

But without markets, the rich reserves in remote locations such as Bolivia and Russia’s Siberia region do the countries little good.

Several natural gas proposals have been made in the wake of California’s energy crisis. More than a quarter of the state’s electricity comes from natural-gas-burning power plants.

The projects are modeled after a successful facility in Trinidad and Tobago, where immense volumes of gas are shipped via tanker to U.S. and European ports.