Bolivia to Seize Oil and Gas Reserves, President-Elect Says

Evo Morales, Bolivia's president-elect, who is visiting South African President Thabo Mbeki, said oil companies
Evo Morales, Bolivia's president-elect, who is visiting South African President Thabo Mbeki, said oil companies "will be partners, not owners." (By Denis Farrell -- Associated Press)

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By Stewart Bailey and Alex Emery
Bloomberg News
Thursday, January 12, 2006

Bolivia's president-elect said his government plans to seize oil and gas reserves owned by international companies, leaving other assets such as pipelines and refineries in the hands of foreign operators.

"The state will exercise its right of ownership, and that means it will decide on the use of those resources," Evo Morales told reporters yesterday in Pretoria, South Africa, where he is visiting the country's President Thabo Mbeki. Oil companies "will be partners, not owners," he said.

The comments clarify plans Morales has discussed since his election Dec. 18 to "nationalize" Bolivia's oil and gas reserves and boost government revenue on output. All reserves are now in the hands of foreign companies such as Spain's Repsol YPF SA, which owns 35 percent of the country's 55 trillion cubic feet of natural gas, and Brazil's Petroleos Brasileiros SA (Petrobras), which holds 17.5 percent. Bolivia has Latin America's second-largest gas reserves.

Morales said he will cancel any contract that gives foreign companies ownership rights to oil and gas. His plans do not call for confiscation of multinationals' technology or other assets, he said.

Petrobras, Brazil's state-controlled oil company, said yesterday that it will lead an $18 billion effort to expand offshore oil and gas production, aiming in part to cut dependence on supplies from Bolivia. Brazil gets about half of its gas, 24 million cubic meters a day, from Bolivia, furnishing fuel to South America's biggest industrial center, Sao Paulo.

Morales, on a 10-country tour that began last week, failed to give details of his energy plan or define what he meant by nationalization until yesterday, said Sebastian Briozzo, an analyst at Standard & Poor's in New York. In Spain and Holland last week, Morales repeated his pledge to take greater state control of Bolivia's energy resources.

International oil companies, including France-based Total SA and Britain-based BG Group PLC, will be able to recover their investments and make a profit in Bolivia, Morales said.

"He needs the companies," said Peter DeShazo, director of the Americas Program at the District-based Center for Strategic and International Studies. "He needs to be able to attract foreign investment in the gas industry and oil."

Even so, Morales said he plans to resurrect the country's state-owned natural resources company. The company was shut down in 1996 as President Gonzalo Sanchez de Lozada, whom Morales later helped drive from office with street protests, sold off state assets. The new company will be involved in production, Morales said.

Bolivia attracted $3 billion of investment for its oil and gas industry since privatizing the state energy company in 1996, helping increase its natural gas reserves sevenfold, according to the Bolivian Hydrocarbon Chamber. Investment in the oil and gas industry dropped to $135 million in 2005 from $236 million in 2004. In 2002, the year Morales lost a presidential runoff against Sanchez de Lozada, investment reached $345 million.

"Bolivia has to get back into the markets, because they lost a lot due to instability," said David Mares, a political science professor at the University of California at San Diego.

Occidental Petroleum Corp., the owner of 2.1 percent of Bolivia's gas reserves through its purchase of Vintage Petroleum Inc., has monitored the situation since before the election, said spokesman Larry Meriage. "There's no surprise," he said.

Repsol spokeswoman Silvia Durand in La Paz did not return calls seeking comment. Petrobras declined to comment.

"It's going to be tough sledding for international interests in South America for the next while," said Dave Pursell, an analyst at Pickering Energy Partners Inc. in Houston. "It's bad for anybody who has assets in there right now."

Morales, a 46-year-old Bolivian coca-farmers' leader, was elected after pledging to challenge U.S. influence in Latin America and take greater control of the country's oil and gas resources. He has forged alliances with Cuban Communist leader Fidel Castro and Venezuelan President Hugo Chavez.


© 2006 The Washington Post Company

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