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UK energy firms face shake-up as Bolivia seizes assets
By Peter Klinger
BP and BG Group, the British energy giants, face a drastic shake-up of their lucrative operations in Bolivia after the South American State』s left-wing president nationalised his country』s oil and gas assets.
President Morales, who assumed office in December with a promise to curb foreign control of the country』s vast oil and gas assets, chose Labour Day yesterday to order his military to take control of energy installations in the country.
By last night, the military and YPFB, Bolivia』s State-owned energy company, had seized control of 53 installations including oil and gasfields, pipelines and refineries.
It was unclear whether assets belonging to BP and BG were among those seized. BG said that it was too early to comment on yesterday』s actions.
BG』s present output in Bolivia is not large, but the country accounts for 11 per cent of BG』s proven and probable oil and gas reserves. Moreover, BG controls Comgas, the monopoly gas distributor in S?o Paulo, and has a stake in the Bolivia-Brazil gas pipeline. Comgas sources about half its gas supplies from Bolivia.
President Morales has ordered foreign companies to sign new operating contracts within 180 days, or leave Bolivia.
The President』s new decree means that Bolivia will regain ownership of gas and oil resources and take charge of their commercialisation, relegating foreign companies to the status of operators. Previously, under Bolivian law, the State did not own the gas once companies had extracted it from underground.
YPFB will pay foreign companies for their services, offering about 50 per cent of the value of production, although the decree indicated that companies at the country』s two largest gasfields iwere likely to receive just 18 per cent.
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Bolivia's military takes control of gas fields
By Carlos Alberto Quiroga
LA PAZ, Bolivia (Reuters) - Bolivian President Evo Morales ordered the military to occupy the country's natural gas fields on Monday after nationalizing the energy sector and threatening to expel foreign companies if they do not sign new contracts within six months.
Impoverished Bolivia has the second-largest natural gas reserves in South America after Venezuela, and the question of how the country should manage these riches has been at the heart of several popular revolts since 2003.
Morales became president in January on vows to exert more state control over the country's natural resources, reflecting a growing backlash against free markets and foreign investment in Latin America. Radical leftists recently complained that he had made little progress on this front.
The president chose Labor Day, May 1, to announce the sector's nationalization, which stipulates companies will have to leave the country unless they sign contracts recognizing the new state control of the fields.
"We are not a government of mere promises: we follow through on what we propose and what the people demand," Morales said after signing a nationalization decree at the San Alberto field, operated by Brazil's state-owned Petrobras in the southeastern province of Tarija.
"We want to ask (the Armed Forces) that starting now, they occupy all the energy fields in Bolivia along with battalions of engineers," Morales said.
Bolivian Vice President Alvaro Garcia said officials from state energy company YPFB and the military began taking control of dozens of energy installations -- including gas fields, pipelines and refineries -- after Morales signed the document.
At a Labor Day celebration in La Paz's main plaza attended by a large crowd, Garcia said the government's energy-related revenue will jump to $780 million next year, expanding nearly sixfold from 2002.
Morales had promised to nationalize the gas sector even during his campaign but repeatedly said he would not expropriate foreign 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 toward increasingly aggressive resource nationalization that we have seen across many countries in Latin America, starting in Venezuela," said energy analyst Antoine Halff of Fimat.
"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," Halff added.
FROM OWNERS TO OPERATORS
Morales read aloud the government decree, which said that "the state recovers ownership, possession and total and absolute control" of hydrocarbons.
This means the state will own these resources and take charge of their sale, 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.
In the new operating contracts, Bolivia will have to give some incentives to foreign companies to keep investing. YPFB alone has no way of financing the development of gas fields.
Top investors in Bolivia's gas sector include Petrobras, Spain's Repsol YPF, UK gas and oil producer BG Group Plc and France's Total.
Spain's foreign ministry said on Monday it was deeply concerned about Bolivia's moves. Repsol said it was too early to evaluate the decree and a Total spokeswoman also said it was too early to comment.
In Brazil, Petrobras officials could not be reached for comment on Monday, a national holiday, although the country's President Luiz Inacio Lula da Silva planned to meet with senior politicians and energy officials on Tuesday to discuss the move.
BG officials were also unavailable for immediate comment.
Last year, Bolivia's Congress passed an energy law that added a 32 percent tax on production to an already-existing 18 percent royalty. It also required that companies renegotiate their contracts with the state.
South America's poorest nation, Bolivia has natural gas reserves of some 48.7 trillion cubic feet. Foreign oil companies have invested more than $3 billion in the last decade, much of it in exploration.
Fresh investment in Bolivia has stalled due to the legal changes and political turmoil that toppled two governments in as many years. The unrest was partly driven by social groups calling for the nationalization of gas reserves.
Bolivia exports most of its natural gas to Argentina and Brazil, with whom the government is negotiating higher prices.
(Additional reporting by Jane Barrett in Madrid and Matthew Robinson in New York)
Bolivia's military takes control of gas fields
By Carlos Alberto Quiroga
LA PAZ, Bolivia (Reuters) - Bolivian President Evo Morales ordered the military to occupy the country's natural gas fields on Monday after nationalizing the energy sector and threatening to expel foreign companies if they do not sign new contracts within six months.
Impoverished Bolivia has the second-largest natural gas reserves in South America after Venezuela, and the question of how the country should manage these riches has been at the heart of several popular revolts since 2003.
Morales became president in January on vows to exert more state control over the country's natural resources, reflecting a growing backlash against free markets and foreign investment in Latin America. Radical leftists recently complained that he had made little progress on this front.
The president chose Labor Day, May 1, to announce the sector's nationalization, which stipulates companies will have to leave the country unless they sign contracts recognizing the new state control of the fields.
"We are not a government of mere promises: we follow through on what we propose and what the people demand," Morales said after signing a nationalization decree at the San Alberto field, operated by Brazil's state-owned Petrobras in the southeastern province of Tarija.
"We want to ask (the Armed Forces) that starting now, they occupy all the energy fields in Bolivia along with battalions of engineers," Morales said.
Bolivian Vice President Alvaro Garcia said officials from state energy company YPFB and the military began taking control of dozens of energy installations -- including gas fields, pipelines and refineries -- after Morales signed the document.
At a Labor Day celebration in La Paz's main plaza attended by a large crowd, Garcia said the government's energy-related revenue will jump to $780 million next year, expanding nearly sixfold from 2002.
Morales had promised to nationalize the gas sector even during his campaign but repeatedly said he would not expropriate foreign 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 toward increasingly aggressive resource nationalization that we have seen across many countries in Latin America, starting in Venezuela," said energy analyst Antoine Halff of Fimat.
"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," Halff added.
FROM OWNERS TO OPERATORS
Morales read aloud the government decree, which said that "the state recovers ownership, possession and total and absolute control" of hydrocarbons.
This means the state will own these resources and take charge of their sale, 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.
In the new operating contracts, Bolivia will have to give some incentives to foreign companies to keep investing. YPFB alone has no way of financing the development of gas fields.
Top investors in Bolivia's gas sector include Petrobras, Spain's Repsol YPF, UK gas and oil producer BG Group Plc and France's Total.
Spain's foreign ministry said on Monday it was deeply concerned about Bolivia's moves. Repsol said it was too early to evaluate the decree and a Total spokeswoman also said it was too early to comment.
In Brazil, Petrobras officials could not be reached for comment on Monday, a national holiday, although the country's President Luiz Inacio Lula da Silva planned to meet with senior politicians and energy officials on Tuesday to discuss the move.
BG officials were also unavailable for immediate comment.
Last year, Bolivia's Congress passed an energy law that added a 32 percent tax on production to an already-existing 18 percent royalty. It also required that companies renegotiate their contracts with the state.
South America's poorest nation, Bolivia has natural gas reserves of some 48.7 trillion cubic feet. Foreign oil companies have invested more than $3 billion in the last decade, much of it in exploration.
Fresh investment in Bolivia has stalled due to the legal changes and political turmoil that toppled two governments in as many years. The unrest was partly driven by social groups calling for the nationalization of gas reserves.
Bolivia exports most of its natural gas to Argentina and Brazil, with whom the government is negotiating higher prices.
(Additional reporting by Jane Barrett in Madrid and Matthew Robinson in New York)
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Bolivia gas under state control
Bolivia's President Evo Morales has signed a decree placing his country's energy industry under state control.
In a May Day speech, he said foreign energy firms must agree to channel all their sales through the Bolivian state, or else leave the country.
He set the firms a six-month deadline, but the military and state energy officials have already started taking control of the oil fields.
Bolivia has South America's second largest natural gas reserves.
But the country has suffered years of political crises over how to develop and profit from the industry.
The main foreign oil firms operating in Bolivia are Brazil's Petrobras, the Spanish-Argentine company Repsol YPF, British companies British Gas and British Petroleum and France's Total.
High energy prices
Speaking at an oilfield in the south of the country, Bolivia's left-wing president called it an "historic day".
"The pillage of our natural resources by foreign companies is over," he declared.
He said the companies had six months to re-negotiate their contracts and urged them to "respect the dignity of Bolivians".
Foreign companies would receive 18% of oil and gas revenues during the transition period, reports said.
Vice President Alvaro Garcia said the military and officials from the state energy firm YPFB moved to take control of 53 energy installations - including gas fields, pipelines and refineries - immediately after the decree was signed.
There was no immediate word from the foreign energy companies themselves.
The firms will get less favourable terms but current high global energy prices may be an incentive to see if they can work with Mr Morales, the BBC's Americas editor Simon Watts says.
Friendly meetings
Mr Morales swept to victory as Bolivia's first indigenous president in January elections after vowing to "recover" the country's natural resources by renationalising them.
However, he has shown signs of pragmatism since coming to office, and has held friendly meetings with several oil bosses.
On a visit to Brazil in January he said renationalising the industry would not mean expelling foreign companies or expropriating foreign property.
"Foreign companies have every right to recover investments and make profits, but profits should be balanced," he told a press conference at the time.
Petrobras is one of Bolivia's largest foreign investors, controlling 14% of the country's gas reserves.
Bolivia gas under state control
Bolivia's President Evo Morales has signed a decree placing his country's energy industry under state control.
In a May Day speech, he said foreign energy firms must agree to channel all their sales through the Bolivian state, or else leave the country.
He set the firms a six-month deadline, but the military and state energy officials have already started taking control of the oil fields.
Bolivia has South America's second largest natural gas reserves.
But the country has suffered years of political crises over how to develop and profit from the industry.
The main foreign oil firms operating in Bolivia are Brazil's Petrobras, the Spanish-Argentine company Repsol YPF, British companies British Gas and British Petroleum and France's Total.
High energy prices
Speaking at an oilfield in the south of the country, Bolivia's left-wing president called it an "historic day".
"The pillage of our natural resources by foreign companies is over," he declared.
He said the companies had six months to re-negotiate their contracts and urged them to "respect the dignity of Bolivians".
Foreign companies would receive 18% of oil and gas revenues during the transition period, reports said.
Vice President Alvaro Garcia said the military and officials from the state energy firm YPFB moved to take control of 53 energy installations - including gas fields, pipelines and refineries - immediately after the decree was signed.
There was no immediate word from the foreign energy companies themselves.
The firms will get less favourable terms but current high global energy prices may be an incentive to see if they can work with Mr Morales, the BBC's Americas editor Simon Watts says.
Friendly meetings
Mr Morales swept to victory as Bolivia's first indigenous president in January elections after vowing to "recover" the country's natural resources by renationalising them.
However, he has shown signs of pragmatism since coming to office, and has held friendly meetings with several oil bosses.
On a visit to Brazil in January he said renationalising the industry would not mean expelling foreign companies or expropriating foreign property.
"Foreign companies have every right to recover investments and make profits, but profits should be balanced," he told a press conference at the time.
Petrobras is one of Bolivia's largest foreign investors, controlling 14% of the country's gas reserves.
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