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Bolivia’s fight for the sea will impact energy sector

Bolivia's case against Chile at the UN's International Court of Justice to reclaim sovereign access to the sea has important implications for the Latin American gas trade and Bolivia’s energy sector

Bolivians have never given up hope of one day reclaiming their coastline, which was lost to neighbouring Chile after its defeat in the War of the Pacific more than a century ago. Every March, Bolivians celebrate Dia del Mar, the Day of the Sea. Landlocked Bolivia even continues to maintain a small navy, though it is mostly confined to patrolling Lake Titicaca.

The latest chapter in Bolivia’s long quest to reclaim sovereign access to the sea started late last month when the government filed a case in the International Court of Justice (ICJ) against Chile. The suit claims that a 1904 peace treaty signed by the countries, in which Chile agreed to lease Bolivia access to its ports but solidified the current borders, should be thrown out and Chile should be forced to negotiate an agreement “granting Bolivia a fully sovereign access to the Pacific Ocean”.

Chile’s president Sebastián Piñera reiterated his government’s long-held position that it is open to talks over Bolivian access to Chilean ports, but rejected giving up sovereignty over any territory gained in the 1904 treaty.

Wider gas trade

The case has important implications for the Latin American gas trade and Bolivia’s energy sector, which is vital the country’s economy. Bolivia has the second-largest gas reserves in Latin America and is a major exporter to Brazil and Argentina. It does not, however, send gas to Chile, which is one of the region’s largest gas importers.

Argentina and Brazil have been reliable and growing markets for Bolivia in recent years. But it is not clear how long that will last. Argentina has vast shale-gas deposits in the Vaca Muerta shale formation in Patagonia, and it has put self-sufficiency at the top of its energy agenda. Development has slowed since the nationalisation of YPF, probably buying Bolivia more time, but the next few years is likely going to see a major push from the government to develop its domestic reserves and cut imports.

Brazil, too, has huge undeveloped gas reserves. State-run Petrobras has prioritised development of its major offshore oil discoveries over gas development. But the government has grown concerned over its increasingly costly gas import bill. Brazil has been paying nearly $700 million a month for gas imports this year. In response, Petrobras launched the Pron-Gas initiative in January, to accelerate onshore gas exploration and development. The government, meanwhile, will hold a shale-gas licensing round later this year to try to drum up investment in the country’s gas sector.

The future of Bolivia’s gas industry, then, is likely to be tied to its old foe Chile. It is in both countries’ economic interests to settle its disputes. Bolivia will likely need to sell gas to Chile. Gaining access to the Chilean coast could also allow Bolivia to build a liquefied natural gas export facility on the Pacific Ocean coast, potentially opening up the lucrative Asian gas markets. Chile, for its part, would benefit from cheaper Bolivian gas imports.

A deal though has been impossible to reach, and few see the ICJ case bringing the conflict to an end. A decade ago, Bolivians took to the streets over former president Gonzalo Sanchez de Lozada’s plans to sell gas to Chile and build a pipeline to the. Those bloody protests, which came to be known as the “Gas War”, forced Lozada from power and paved the way for president Evo Morales’ rise. A 2004 referendum, supported by Morales, banned the sale of gas to Chile without a deal over sovereign access to the coast. That makes compromise difficult for Morales. But he is clearly playing the weaker hand, and as the position of the country’s gas industry becomes more perilous it is only going to become weaker. Morales should use the case as an opportunity to go back to the negotiating table.

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