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 Business News | May 2006 
Bolivia Nationalizes Natural Gas Sector
 Carlos Alberto Quiroga - Reuters
| | Bolivian President Evo Morales announced the renationalization of Bolivian natural gas on Monday. He is requiring all foreign-owned companies to relinquish their natural gas fields to the state immediately and has ordered their occupation by the military. The banner calls him Bolivia's "liberator." (Noah Friedman-Rudovsky/NYTimes) |
La Paz, Bolivia - Bolivian President Evo Morales signed a decree on Monday to nationalize the hydrocarbons sector, requiring foreign-owned companies to turn over their natural gas fields to the state immediately and ordering the military to occupy them to ensure production.
Impoverished Bolivia has the second largest natural gas reserves in South America after Venezuela, and the question of how the country should manage these riches has been at the heart of several popular revolts since 2003.
Morales, a leftist leader of coca-leaf farmers, became president in January on vows to exert more state control over the country's natural resources. Radical leftists recently complained that he had made little progress on this front.
The president chose Labor Day, May 1, to announce the sector's nationalization, ordering companies to sign new operating contracts within 180 days or leave the country.
"We are not a government of mere promises, we follow through on what we propose and what the people demand," Morales said after signing the decree at the San Alberto field, operated by Brazil's state-owned Petrobras in the southeastern province of Tarija.
"We want to ask (the Armed Forces) that starting now, they occupy all the energy fields in Bolivia along with battalions of engineers," Morales said.
Bolivian Vice President Alvaro Garcia said officials from state energy company YPFB and the military began taking control of 53 energy installations - including gas fields, pipelines and refineries - right after Morales signed the document.
At a Labor Day celebration crowding La Paz's main plaza, Garcia said the government's energy-related revenue will jump to $780 million next year, expanding nearly sixfold from 2002.
From Owners to Operators
Morales read aloud the government decree, saying "the state recovers ownership, possession and total and absolute control" of hydrocarbons.
This means the state will own these resources and take charge of their commercialization, relegating foreign companies to operators. Previously, Bolivian law said the state no longer owned the gas once companies extracted it from underground.
YPFB will pay foreign companies for their services, offering about 50 percent of the value of production, although the decree indicated that companies at the country's two largest gas fields would get just 18 percent.
In the new operating contracts, Bolivia will have to give some incentives to foreign companies to keep investing. YPFB alone has no way of financing the development of gas fields.
Top investors in Bolivia's gas sector include Petrobras, Spain's Repsol YPF , UK gas and oil producer BG Group Plc and France's Total .
Petrobras officials in Brazil could not be reached for comment on Monday, which was a holiday there as well.
Morales had promised to nationalize the gas sector even during his campaign but repeatedly said he would not expropriate foreign companies' assets.
Last year, Bolivia's Congress passed a hydrocarbons law that added a 32 percent tax on production to an already-existing 18 percent royalty. It also required that companies renegotiate their contracts with the state.
South America's poorest nation, Bolivia has natural gas reserves of some 48.7 trillion cubic feet. Foreign oil companies have invested more than $3 billion in the last decade, much of it in exploration.
Fresh investment in Bolivia has stalled due to the legal changes and political turmoil that toppled two governments in as many years. The unrest was partly driven by social groups calling for the nationalization of gas.
Bolivia exports most of its natural gas to Argentina and Brazil, with whom the government is negotiating higher prices. |
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