An earlier dispute over gas prices concerning the extension of a sales contract for existing volumes of gas was resolved earlier this year after Argentina agreed to allow Bolivia to raise the price that it pays for gas imports to US$2.08/MMBtu from US$1.60/MMBtu, bringing the price paid for gas exports to Argentina in line with the price charged by Bolivia for its exports to Brazil .

However, Argentina's request that a price reduction accompany any further increase in volumes is a reminder of the difficulties that
the Argentine government has at home in justifying the cost of importing Bolivian gas. Domestic gas producers argue that if prices at the wellhead were to increase to similar levels to that charged for imported gas, that would help to stimulate increased investment in boosting domestic output.

Significance: Bolivia has become increasingly dependent on demand for its gas exports from its neighbours following the collapse of the Pacific LNG project. Gas exports from Bolivia are crucial to help minimise the impact of another potential domestic supply shortage in Argentina in the 2005 southern hemisphere winter, as well as for a longer-term project to build a new gas pipeline between both countries.

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