Thu May 4, 2006 5:55 AM BST
By Helen Popper
LA PAZ, Bolivia (Reuters) - Oil companies in Bolivia reassessed their investment plans on Wednesday as regional leaders prepared for an emergency summit to discuss President Evo Morales' nationalisation of the energy industry.
In the poor city of El Alto, indigenous healers offered up coca leaves in traditional ceremonies to cheer Morales for seizing control of oil and gas fields from foreign companies, signalling the strong domestic support for his decision.
But the leftist's action alarmed investors and worried Bolivia's South American neighbours -- its biggest customers -- and European allies whose companies operate in Bolivia.
Brazil is the largest investor in Bolivian energy through state oil company Petrobras, with some $1.5 billion (816 million pounds) in investments.
Brazilian President Luiz Inacio Lula da Silva played down any diplomatic friction between the two countries over Morales' decision.
"There is no crisis between Bolivia and Brazil and there will be no crisis," he told reporters in Brasilia. "Our differences will be resolved around a negotiating table."
But Petrobras Chief Executive Jose Sergio Gabrielli said the company was scrapping plans to expand a natural gas pipeline from the Andean country. The project would have increased capacity by 50 percent from the current 30 million cubic meters per day.
Spain's government said it would depatch a delegation to La Paz to discuss Morales' nationalisation, which also calls for higher taxes and caps companies' revenues.
Morales has given foreign firms 180 days to sign new contracts with his government.
The nationalisation is an "isolated problem" that requires "diplomatic and political efforts," Spanish Prime Minister Jose Luis Rodriguez Zapatero said.
Spain's Respol is a leading player in Bolivia.
SOUTH AMERICAN LEADERS TO MEET
On Thursday, Morales is expected to meet with Brazil's Lula, Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez in the Argentine city of Puerto Iguazu to discuss the impact of the new energy rules.
Argentina is the second-biggest market for Bolivian gas.
Chavez -- who enacted similar measures to rewrite contracts and impose retroactive tax hikes in Venezuela, the world's fifth-largest oil exporter -- arrived in La Paz late on Wednesday before the presidential summit.
After being greeted by Morales on the airport tarmac, a beaming Chavez congratulated him on the nationalisation, saying "the voice of the people is the voice of God."
Chavez and Morales emerged from a three-hour meeting to announce a "strategic alliance" between Bolivia's state-owned YPFB and Venezuela's PDVSA to develop gas industrialisation projects, a partnership to be formalised later this month.
"Some companies have said they will not invest any more and they have the right to not invest, we have many offers for investment and calls from interested companies," Morales said.
When asked whether Venezuela would help YPFB operate Bolivia's natural gas fields in the short term, Chavez said PDVSA was "at their service."
During a visit to gas facilities earlier in the day, Bolivian Energy Minister Andres Soliz said the decree marked a break with past exploitation. "They always told us we didn't know how to manage our resources and because of that we needed foreign companies. All that's finished now," he was quoted as saying by state news agency ABI.
On the streets of La Paz, there were signs of support for Morales, who has accused foreign companies of plundering the vast natural resources in South America's poorest country.
Besides the coca leaf ceremony, a makeshift banner reading "Nationalised" hung at a gas station along the main road linking central the city to the international airport.
The sprawling slum city El Alto, outside La Paz, was the scene of the bloody "gas war" in October 2003, which toppled the government at the time and is home to some of the leftist social groups who called for the nationalisation of energy.
"El Alto spilt a lot of blood... in demanding the nationalisation of our hydrocarbons. Now, a big step forward has been taken," said Nestor Salinas, leader of an association representing those killed during the 2003 unrest.
(Additional reporting by Andrew Hay in Madrid, Andrei Khalip in Rio de Janeiro, Carlos Quiroga, David Mercado and Mario Roque in La Paz)
© Reuters 2006. All Rights Reserved.
http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2006 -05-04T045510Z_01_N03189590_RTRUKOC_0_UK-BOLIVIA.xml&archived=False
This email was cleaned by emailStripper, available for free from http://www.papercut.biz/emailStripper.htm