UPDATE 1-Repsol to boost natural gas output in Bolivia

Thu Nov 26, 2009 12:32pm EST

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(Adds details on Bolivian consortium operated by Repsol)

By Eduardo Garcia

LA PAZ Nov 26 (Reuters) - A consortium led by Spain's largest oil company Repsol (REP.MC) will invest $1.5 billion to boost natural gas output in Bolivia, which will allow the country to increase exports to Argentina, the company's CEO said on Thursday.

Antonio Brufau, Repsol's chief executive officer, announced the investment after a meeting with Bolivia's leftist President Evo Morales in La Paz.

He said the investment will allow the company to increase output in its Huacaya and Margarita fields to 8 million cubic meters a day in 2012 from the current 2 million cubic meters, and to 14 million cubic meters a day by mid-2013.

The fields are inside the Caipipendi block, in which Repsol has a 37.5 percent operating stake, BG Group Plc (BG.L) has 37.5 percent, and Panamerican Energy 25 percent.

In a statement released on Thursday Repsol said its share of the investment was nearly $600 million.

The money will be spent to drill natural gas wells, build pipeline infrastructure and a natural gas processing plant, another Repsol official told Reuters.

Brufau added that in the area where Repsol will be investing there are proven reserves of 3.7 trillion cubic feet of natural gas, but the total amount could reach up to 12 trillion cubic feet.

Both Brufau and the head of Bolivia's state-run energy company YPFB Carlos Villegas said the bulk of Repsol's production increase will be exported to Argentina.

"We're going to have enough output for the Argentine market," said Villegas referring to a deal that Bolivia signed in 2006 to nearly quadruple natural gas exports to Argentina to 27.7 million cubic meters a day in the coming years from the current daily maximum of 7.7 million cubic meters.

Bolivia is reportedly renegotiating the terms of this contract with the Argentine government.

Villegas also said that Repsol will be the leading investor in Bolivia's natural gas sector in the next five years.

The Andean country's natural gas production has been stable at around 40 million cubic meters a day for at least three years, despite previous government announcements that foreign companies were planning to invest heavily to boost output.

Bolivia has the second largest reserves of natural gas in South America after Venezuela, and it is the region's main exporter, supplying the fuel to Argentina and Brazil.

The impoverished nation exported over $3 billion worth of natural gas to Argentina and Brazil in 2008 but it has been hard hit by falling prices and lower demand from Brazil. (Editing by Vivianne Rodrigues) ((eduardo.garcia@thomsonreuters.com; +59 1 2 244 4866; Reuters Messaging eduardo.garcia.reuters.com@reuters.net))

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