Petrobras Faces Cuts in Natural Gas Supply by Bolivian YPFB and Will Take Measures to Comply with Contract

After the Cuts in Natural Gas Supply from the Bolivian YPFB to the Brazilian State Company Petrobras, the Company Issued a Statement Stating That It Will Take the Necessary Measures to Fulfill the Contract as Provided in the Initial Agreement

The Brazilian state company Petrobras recently announced a cut of about 30% in the supply of natural gas from the Bolivian company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB). And, during last Saturday (05/21), the state company spoke about the matter again and stated that it will take the necessary measures for the Bolivian company to fulfill the supply contract as initially established in the partnership.

Bolivian Company YPFB Cuts 30% in Natural Gas Supply to Petrobras, and State Company Feels the Impact on Fuel Supply

Petrobras announced at the beginning of the week a significant cut made by the Bolivian natural gas company YPFB in the supply of the fuel to the state company. Thus, a total cut of 30% was made in the supply chain, equivalent to 6 million cubic meters of fuel per day. Consequently, this drop diminished the relief felt by Petrobras in the first quarter of the year, when it celebrated the reduction in LNG imports and the consequent drop in costs.

According to the state company’s initial announcement, the Bolivian company had not explained the reason for the significant cut in natural gas supply and had only reduced the distribution. However, it is believed that the cut might have been motivated by the start of gas supply from Bolivia to Argentina at better prices than those practiced by Petrobras. This is because the price of natural gas has been very high in recent months due to international conflicts between Russia and Ukraine and the overall impact on the global market.

Thus, if before the pandemic the million BTU (the measure used for trading the input) was traded at US$ 5, this Wednesday the price was around US$ 27 per million BTU, after having already reached US$ 34. As a result, the decrease in natural gas supply to the Brazilian state company could strongly impact the production and distribution chain of the company in the national territory if the problem cannot be resolved with YPFB as soon as possible to mitigate future damages.

State Company Issues Clarification Note and Claims That It Will Take Measures for YPFB to Fulfill the Natural Gas Supply Contract

Since the beginning of the contract with the Brazilian state company, the partnership stipulates that YPFB supplies Petrobras with the contracted volume of 30 MM m³/day, as well as foresees consequences for the supplier in the event of a supply failure, which will be applied by Petrobras to the Bolivian company. And, with the drop in natural gas delivery to the state company during this month, the Brazilian company issued a statement saying that it will take the necessary measures to ensure the contract is properly fulfilled.

Additionally, Petrobras stated: “We emphasize that the natural gas sales contracts signed by Petrobras with its customers have a previously established price, which is updated based on parametric formulas linked to market indicators and agreed upon by the parties, which are not affected by specific situations of failures with suppliers. Petrobras reaffirms its commitment to its customers and to fulfilling the contractually established conditions.”

After the supply cut, Petrobras informed the relevant government authorities as well as the measures taken to ensure supply to its customers, and now, it continues its efforts to establish possible measures to ensure that natural gas supply is not more severely affected in the coming days.