President Evo Morales ordered the military to occupy Bolivia's natural
gas fields on Monday after nationalizing the industry and threatening to expel
foreign companies that do not recognize state control.
Bolivia has the second-largest natural gas reserves in South America after
Venezuela, and disputes over how the impoverished country should manage those
riches have sparked several popular revolts since 2003.
Morales became president in January on vows to exert more state control over
natural resources, reflecting a growing backlash against free markets and foreign
investment in Latin America.
The president chose Labor Day, May 1, to announce the nationalization, which
stipulates companies will have to leave Bolivia unless they sign contracts within
six months recognizing state control.
"This is just the start ... tomorrow or the day after it will be mining,
then the forestry sector, and eventually all the natural resources for which
our ancestors fought," Morales told a jubilant crowd in La Paz's main plaza.
Morales ordered the Armed Forces and "battalions of engineers" to
occupy energy fields after signing a decree earlier in the day at the San Alberto
field in Tarija province, operated by Brazil's state-owned Petrobras (PETR4.SA:
Officials from state energy company YPFB and the military took control of dozens
of installations, including gas fields, pipelines and refineries, and the government
said it would guarantee production and exports.
Morales had long pledged to nationalize the sector but said repeatedly he would
not expropriate companies' assets.
Bolivia's actions echo what Venezuelan President Hugo Chavez, a Morales ally,
did in the world's fifth-largest oil exporter with forced contract migrations
and retroactive tax hikes -- conditions that oil majors largely agreed to accept.
"This is a continuation of the trend towards increasingly aggressive resource
nationalization that we have seen across many countries in Latin America, starting
in Venezuela," energy analyst Antoine Halff of Fimat said.
"The measure is in line with the populist tone of the new regime in Bolivia;
however, how it is carried out in practice still seems somewhat unclear,"
FROM OWNERS TO OPERATORS
The government decree says "the state recovers ownership, possession and
total and absolute control" of hydrocarbons.
This means the state will own and sell these resources, 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.
Top investors in Bolivia's gas industry include Petrobras
-- which controls more than 45 percent of Bolivia's gas fields
-- Spain's Repsol YPF (REP.MC: Quote,
France's Total (TOTF.PA: Quote,
and British gas and oil producer BG Group Plc (BG.L: Quote,
YPFB alone has no way of financing the development of gas fields.
Spain's foreign ministry said on Monday it was deeply concerned about Bolivia's
actions. Repsol said it was too early to evaluate the decree and a Total spokeswoman
said the same. BG officials were not immediately reachable.
Petrobras President Jose Sergio Gabrielli told Brazil's Globo Television Network:
"The decree is imprecise and is open to various interpretations about how
it will be applied. We will take all possible steps to ensure that the Brazilian
market is supplied with gas."
"There's no way that new investment in gas production with 18-percent
return can be viable, these conditions make gas operations practically impossible
in Bolivia," he added.
Brazilian President Luiz Inacio Lula da Silva called an emergency meeting with
Gabrielli and government ministers for Tuesday.
In the decree, Bolivia also gave YPFB majority control in companies Chaco and
Andina, gas transport firm Transredes and two refineries owned by Petrobras.
"These are in fact cases of expropriation," Bolivian analyst Gonzalo
South America's poorest nation, Bolivia has reserves of some 48.7 trillion
cubic feet and exports most of its gas to Brazil and Argentina. Foreign companies
have invested more than $3 billion in the last decade, much of it in exploration.
Bolivian Vice President Alvaro Garcia said the government's energy-related
revenue will jump to $780 million next year, expanding nearly sixfold from 2002.
(Additional reporting by Jane Barrett in Madrid,
Matthew Robinson in New York, Alexandre
Caverni in Sao Paulo and Peter Blackburn in
Rio de Janeiro)