Foreign investors bow to Morales By Hal Weitzman in Lima Financial Times October 29 2006
Foreign investors in Bolivia’s gas sector have bowed to the leftwing government’s nationalisation plan, agreeing to pay up to 82 per cent in tax, hand over control of commercialisation to the state and invest billions of dollars in the Andean country.
“With these new contracts we want to generate more economic resources to solve the economic and social problems of our country,” said Evo Morales, the leftwing Bolivian president.
The Bolivian Hydrocarbons Chamber, which represents foreign investors such as Petrobras, Repsol, Total and British Gas, said the new accords would create “a positive and lasting relationship between partners – the companies and the state”.
Mr Morales announced in May he was nationalising Bolivia’s gas reserves, the second largest in the region, and gave foreign operators 180 days to renegotiate their operating contracts or leave the country.
All big foreign investors had threatened to take Bolivia to international arbitration but ultimately that proved no more than a negotiating tactic.
A sticking point in the race to meet the deadline was the companies’ reluctance to be downgraded to mere service providers, operating turn-key contracts in which YPFB, the Bolivian state company, would be officially in charge of selling gas to neighbours such as Brazil and Argentina and would refund a portion of the profits to the oil companies.
Carlos Villegas, Bolivian hydrocarbons minister, said YPFB “will control 100 per cent of commercialisation … in all contracts”. Although La Paz has not yet given details of the new contracts, it is possible that the state will compensate foreign investors for the loss of commercialisation rights.
Silas Rondeau, Brazil’s energy minister, admitted to reporters that Petrobras, the Brazilian state-owned company that is the biggest foreign investor in Bolivia, would become a service provider and said the company had accepted a tax increase from 50 per cent to 82 per cent.
However, Mr Rondeau said it was “still worthwhile” continuing to operate in Bolivia and that “conditions of profitability” remained. He also said that Brazil had secured an increase in gas exports of about 4m cubic metres a day, to 30m cubic metres.
As part of the new contracts, Petrobras is expected to invest $1.5bn in Bolivia, while Repsol will pledge to plough more than $1bn into exploration and production.
“The biggest concern in our sector has been the lack of investment,” said the Hydrocarbons Chamber. “With these new agreements we envisage the reactivation of Bolivia’s hydrocarbons industry.”