Bolivia Nationalizes Gas and Gets What It Wanted from Brazil

Bolivian President Evo Morales completed his ambitious oil and gas nationalization plan early Sunday, October 29, with the last-minute signing of contracts allowing several international companies to continue operating in the country under state control.

Just after a midnight Saturday deadline to wrap up the nationalization talks, Morales joined representatives of eight companies for the signing ceremony in La Paz, achieving one of his nine-month-old government’s central goals.

Among the companies were two affiliates of Brazilian state energy giant Petrobras, Spanish-Argentine company Repsol YPF and Repsol’s Bolivian subsidiary, Andina. The French company Total SA and the U.S.-based Vintage Petroleum signed nationalization deals Friday.

Morales nationalized the South American country’s oil and gas industry last May first giving foreign companies 180 days to sign new deals handing majority control of their Bolivian operations or leave the country.

At the ceremony, Morales said the petroleum nationalization would be only the first step in his campaign to recover control of Bolivia’s natural resources. Earlier this month, he announced plans to bring Bolivia’s mines under state control.

"Bolivia will not be as it was before, a beggar state with many social problems," Morales said. "We will continue in this path of recovering our natural resources, not only the hydrocarbons but also the minerals and the non-metallics, and all nonrenewable natural resources that belong to the Bolivian people."

The president commended the international companies for becoming "partners" in Bolivia’s future. "As we have said before, we are looking for good partners," Morales said. "We need partners to help us resolve the social problems of our country."

Petrobras is Bolivia’s largest single foreign investor and the largest player its natural gas industry. Its long-running and often contentious talks with Morales’ government were vital to the nationalization process.

With those tensions in the past, Morales spoke warmly of Bolivia’s biggest neighbor.

"As Bolivians we recognize that Brazil is the leader of the region, and that’s why its businesses are so important to our country," he said. "We are obligated to live with Brazil in a marriage without divorce, because we both need each other."

Morales also endorsed his ally Brazilian President Lula Inácio da Silva on the eve of his bid for re-election in Brazil’s presidential runoff. "I believe in my friend Lula," he said.

While Petrobras is the largest producer of Bolivian gas, Repsol YPF and its subsidiary Andina control the largest share of Bolivia’s known gas reserves, with 35%. Petrobras controls 16% and Total SA 14%. All three are involved in the massive San Alberto and San Antonio gas fields in southern Bolivia, which together produce some 70% of the country’s total natural gas output.

Under the terms of Morales’ nationalization decree, the state raised its share of the revenues from the two giant fields from 50 to 82%, while taking only a 60% share at Bolivia’s minor deposits.

The signings represent a political victory for President Morales, who had been for months dogged by criticism over the slow and uncertain progress. The signing ceremony took place in the same hall where former President Gonzalo Sanchez de Lozada privatized Bolivia’s gas industry in 1996. In the decade since privatization, Petrobras has invested over US$ 1.5 billion in the exploration and production of Bolivian natural gas.

Petrobras owns Bolivia’s two main refineries and operates the gas pipeline which pumps 26 million cubic meters of gas every day to the industrial hub of São Paulo and is equivalent to half of Brazil’s gas consumption.

Demands to re-nationalize Bolivia’s natural gas reserves were at the heart of violent 2003 protests that chased Sanchez de Lozada into U.S. exile and catalyzed the indigenous political movement that eventually propelled Morales to power.

The new contracts came a week after Morales and Argentine President Nestor Kirchner signed a US$ 17 billion deal significantly expanding Bolivia’s natural gas exports to Argentina over the next 20 years.

Morales said the nationalization plan and the Argentine deal would provide Bolivia some one billion in revenues this year and up to 4 billion annually in four years’ time.

The other companies signing deals Sunday were Argentine company Pluspetrol, British Gas Bolivia Corporation, British Gas subsidiary Chaco, and Matpetrol, a Bolivian company that operates internationally through its parent, Equipetrol.

Mercopress

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