Is this a win? Foreign Firms Bow to Bolivia Energy Nationalization
Article Tools Sponsored By By REUTERS Published: October 29, 2006 LA PAZ, Bolivia ( Reuters) - Bolivia's leftist president, Evo Morales, took a key step forward in his bold plan to nationalize the country's gas and oil industries on Sunday after foreign energy companies agreed to operate in the country under state control. Major energy firms including Petrobras and Repsol YPF ended months of talks with the government with last-minute agreements before a deadline set for midnight Saturday, agreeing to new contracts handing over a larger share of their profits to the Bolivian state. The deals amounted to a political boost for Morales, the country's first indigenous leader, who has faced criticism for months that the process had been slow-moving and clouded with uncertainty. ``With these new contracts we want to generate more economic resources to solve the economic and social problems of our country. That's our great wish,'' Morales said during a signing ceremony attended by company executives. A nationalization decree issued by Morales on May 1 gave foreign companies six months to negotiate new contracts handing over a majority stake in their Bolivian operations or abandon the country. Brazil's Petrobras (PETR4.SA)(PBR.N) and Spain's Repsol YPF (REP.MC) are the biggest investors in Bolivia's oil and gas industry, controlling 47.3 percent and 26.7 percent of the proven and probable natural gas reserves in the country. Petrobras, Brazil's state-owned oil company, also pledged to invest $1.5 billion in Bolivia's energy industry after agreeing to operate in the country under state control, Juan Carlos Ortiz, the head of Bolivia's state-owned energy company YPFB, told Reuters. On Friday night, France's Total (TOTF.PA) and U.S-based Vintage became the first companies to comply with the nationalization. Although specific details of the new contracts have not been revealed, the government has said they are designed to give YPFB more control over production and commercialization of oil and gas products. The government has also said new contracts would contain a clause requiring energy multinationals to invest part of their profits in the country's energy sector. According to the new deals, the companies will now operate as service providers to Bolivia's YPFB in exchange for between 18 to 50 percent of the revenue. Morales, wearing his trademark striped sweater, said the agreements will quadruple Bolivia's energy revenues over the next four years from a current $1 billion. He also sought to assure companies their operations would be protected by the law. ``What we are doing here is to exercise our property rights, as Bolivians, over our natural resources, without evicting any one, without confiscating,'' he said. The Bolivian leader insists he wants to use the energy revenue to help alleviate poverty in South America's poorest country. NEW CONTRACTS Some energy companies with smaller interests in Bolivia, including British gas and oil producer BG Group Plc (BG.L), Amoco, which is controlled by British Petroleum (BP.L), and the Argentine companies Pluspetrol and Matpetrol also signed new contracts. A major campaign pledge by Morales, the drive to assert greater state control over Bolivia's gas and oil fields has suffered a series of setbacks in recent months, including resignations of key officials, prompting analysts to say the nationalization was flailing. A lack of technical expertise and funds at YPFB also slowed the government's efforts to take over Bolivia's natural gas reserves, the second largest in South America after Venezuela's. The government had been locked in arduous talks for months ahead of the deadline, particularly with Petrobras. Brazil is the biggest buyer of Bolivian natural gas and Petrobras has invested more than $1.5 billion in oil and gas exploration and exploitation in recent years. The nationalization ``has assured significant investments, put the most important is the recovery of our sovereignty over our natural resources,'' YPFB President Juan Carlos Ortiz said. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com
