Bolivia Nationalises Oil and Gas Fields

[Menydh]

'Don't be scared' Bolivia tells companies after gas grab

Times On Line
May 2, 2006

President Evo Morales of Bolivia has ordered the military to seize 56 foreign-owned oil and gas fields in a nationalisation move that hit shares of companies operating in the Latin American country today.

Senor Morales called on the military to occupy the fields and gave warning he would throw out foreign companies who refused to recognise the nationalisation of the country’s oil and gas fields, which are the second largest reserves in the region after Venezuela.

The leftwing President, who came to power on a platform of re-nationalisation, warned of similar action in other sectors. "We are beginning by nationalising oil and gas. Tomorrow we will add mining, forestry and all natural resources – what our ancestors fought for," he said in a May Day speech at the San Alberto gas field in southern Bolivia.

Foreign investors were unable to assess the full impact of the decision, as details of the nationalisation policy were not readily available. The President has given the companies 180 days to renegotiate contracts.

The nationalisation policy would effectively downgrade the role of foreign companies from owners of the assets to simply operators. The Spanish Government swiftly declared its "profound worry" about the nationalisation, as shares in the Spanish energy group Repsol YPF took a hit.

The Bolivian Embassy in London told Times Online the President would issue a further statement on the details of the nationalisation policy in the coming week and denied the move would undermine foreign investment in the country, as investors take fright.

"In the end, the companies will understand these new rules help Bolivia and make it more stable. They should not be scared," said Pablo Ossio, the Charge d’Affairs at the embassy.

Asked whether the Bolivian Government would compensate foreign companies who lose their assets, he said there would be an audit of foreign energy assets over the coming six months. "But I don’t think they’ll be compensated," he said.

Analysts warned the move was bound to damage investor sentiment and returns of companies based in the country.

"Shareholders will no longer be able to see those oil and gas reserves on the company books. Also, the companies have gone from being owners of assets to a service provider to the Bolivian government. That is a more risky business," said Jason Kenney, senior oil and gas equity strategist at ING in Edinburgh.

"If you’re an energy company with $1 billion to spend, will you put it in Bolivia now or go elsewhere in the world?"

Total foreign investment in Bolivia’s oil and gas sector stands at $3.5 billion. All the world’s biggest energy giants are present in the market. Total reserves are 54 trillion cubic feet, according to the embassy.

Shares in international companies operating in the region suffered as investors digested the news. The biggest loser was Repsol, which opened 3 per cent lower in early trading.

The Madrid-based company has 18 per cent of its reserves based in the country that also accounts for nine percent of its production, according to analysts Citigroup.

"The news appears worrying for us, but we still do not have enough information and documents to draw any conclusions," said a spokeswoman for the Spanish company.

Britain’s BG and BP expect disruption to their regional operations following the nationalisation. However, the British companies’ exposure is limited. For example, BG only sources 3 per cent of its production from Bolivia. Neither company was prepared to comment at this stage.


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Presidents meet to discuss Bolivia gas reserves

Financial Times
May 4, 2004

The presidents of Brazil, Argentina, Bolivia and Venezuela met on Thursday in the Argentinian border town of Puerto Iguazu to discuss the future of Bolivian natural gas supplies to the region after Bolivia’s Evo Morales announced this week the nationalisation of his country’s oil and gas reserves.

Mr Morales headed to the meeting with the aim of securing agreement on increasing the price of gas sold by Bolivia to Argentina and Brazil, while President Luiz Inácio Lula da Silva of Brazil sought to defend the interest of state-controlled oil and gas company Petrobras, the largest private investor in Bolivia.

Petrobras on Wednesday said it would fight any natural gas price increase that Bolivia seeks to impose on Brazil and suspend investment in the country.

“We have a contract that was signed in 1997…and our expectation is that that contract will be fulfilled,” José Sergio Gabrielli, chief executive.
Mr Morales responded on Thursday: “They can blackmail us, but it is not possible that with our resources, they have a great company and ... the Bolivian economy is in a bad situation.”

After meeting with Hugo Chávez, the Venezuelan president, Mr Morales said investments in gas exploration would continue in Bolivia. “Some businesses say they are not going to invest. That doesn’t matter….PDVSA [the Venezuelan state oil company] will be a great partner in the industrialisation of our natural gas.”

Mr Morales also said Brazil and Argentina needed to increase the price they were paying for gas.

Mr Chávez arrived in La Paz on Wednesday night to accompany the Bolivian leader to the summit. The two leaders have agreed to present a common front at the summit to defend the nationalisation, said Mr Morales.

He added that modifications in the natural gas price would not be open for negotiation. “Perhaps we will inform, but no more. We are not going to negotiate or modify anything. Nationalisation is a sovereign decision by the people that cannot be changed….In Iguazu we will talk about regional energy integration, nothing else.”

Mr Morales told the press that Néstor Kirchner, Argentina’s president, and Mr Lula da Silva supported his nationalisation policy. “Who could reject nationalisation? Nobody,” he said.

Alex Contreras, Mr Morales’s official spokesman in La Paz, said the Bolivian leader was not going to Argentina to “negotiate away” the terms of the nationalisation decree. “The decree is not a platform for further negotiations, but a statement of policy,” said Mr Contreras.


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[Menydh]

Bolivians divided over gas field nationalisation

Financial Times
May 4, 2006

Captain Julio Jiménez saunters away from his idle troops – save a couple manning the gates – and, grinning, stretches out his hand in welcome. He does not seem too fazed by the responsibility of guarding one of Bolivia’s most productive gas fields following the sudden nationalisation of its natural gas resources on Monday.

“I see no danger here, we’re just fulfilling our orders: to provide security and guarantee that production continues as normal so there are no shortages in the countries we export gas to,” he says, surveying the surrounding Andean foothills that rise abruptly from the plains of the semi-arid Chaco region.

A year ago, San Alberto, a gas field in the far south that fuels much of São Paulo’s energy needs, was operated by Petrobras, the Brazilian state energy company, which paid a tax rate of 18 per cent. From this week, and until the company renegotiates its contract, the field will be taxed at a rate of 82 per cent. Little wonder, perhaps, that President Evo Morales announced the nationalisation at San Alberto, and that the gas field is being closely monitored by the military.

Mr Morales and his troops have the unbounded support of many poorer Bolivians. Shortly after the nationalisation decree, some of the president’s more fervent supporters gathered in the modest central square of Yacuiba, a dusty town near San Alberto on the border with Argentina, shortly to chant: “Death to the neo-liberal expropriators! Long live Evo!”

“Our time has come. We have had enough of our country being ransacked by imperialists,” one enthusiastic speaker raged. “What is in Bolivia belongs to the Bolivians. If the foreign companies don’t like the new rules they can get out.”

In the days since the decree, the government has been doing its best to sell its message domestically, with television spots rebroadcasting highlights from Mr Morales’ announcement that conclude with the message “Evo cumple” (Evo fulfils).

However, most residents of the relatively wealthy province of Tarija, which has more than half of Bolivia’s natural gas reserves, are not quite so convinced by the nationalisation drive.

Not least the workers at the San Alberto plant, who ridicule the idea that the army needs to be there to prevent them from abandoning their posts, damaging production or sabotage. “We’re hardly going to do anything that would harm our own business,” says one employee. “It’s excessive. I mean, they have guns and bullets!”

Mr Morales is not popular in gas-rich Tarija. There is a suspicion that nationalisation is aimed at centralising the president’s control over natural resources ahead of a referendum in July that should result in greater autonomy for regional government.

“It’s all for show,” says Ramiro Gumiel, the mayor of the local district. He is dismissive of Capt Jiménez’s suggestions that locals who oppose nationalisation might try to seize the plant or do anything to further destabilise the situation.

“Gas is the economic life blood of the region. Let us pray that Mr Morales’ antics do not halt foreign investment,” he says.

Victor Hugo Aguilar, who lives in Yacuiba, worries that Mr Morales is increasingly becoming a “puppet” of Venezuela’s President Hugo Chávez – who is no magnet for foreign investors – and that this is harming Bolivia’s relations with other countries.

The closeness between the two leaders is more than symbolic. Mr Chávez arrived in La Paz on Wednesday night to accompany Mr Morales to Thursday’s regional energy summit in Puerto Iguazu, for which the two leaders prepared a joint position to defend Bolivia’s nationalisation plan.
After meeting Mr Morales, Mr Chávez announced that YPFB and PDVSA, Bolivia and Venezuela’s state energy companies, will sign a “strategic alliance” on May 18 under which Venezuela will invest in exploration and technology.

If Mr Morales is minded to take on his neighbours, he should be aware that Bolivia’s disagreements with foreign countries have not always ended favourably. In its last open conflict, Bolivia’s army suffered a disastrous defeat to Paraguay in the Chaco War of the 1930s, fought over land that was mistakenly believed to be rich in oil. Ironically, Mr Morales chose the name “Heroes of the Chaco” for the announcement of the nationalisation of Bolivia’s natural gas.

Mr Aguilar neatly summarises Bolivia’s dilemma: “The nationalisation of our natural resources is partly good, but partly bad. It is good that Bolivia profits more from its resources, but at the same time we don’t want to scare companies away. The world can live without Bolivia, but Bolivia cannot live without the world.”


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