Brazil warns against Bolivian hydrocarbons legislation

April 4, 2005
Future investments by Brazil's state-owned Petroleo Brasileiro SA (Petrobras) in Bolivia's oil and gas industry will be jeopardized if Bolivia's proposed hydrocarbons bill is approved by the Senate, Brazil's Mines and Energy Ministry said in a news release. The bill has been approved by the lower house.

Future investments by Brazil's state-owned Petroleo Brasileiro SA (Petrobras) in Bolivia's oil and gas industry will be jeopardized if Bolivia's proposed hydrocarbons bill is approved by the Senate, Brazil's Mines and Energy Ministry said in a news release. The bill has been approved by the lower house.

"Approval of the hydrocarbons law will without a doubt entail serious difficulties for Brazilian investments in Bolivia," Brazil's Mines and Energy Minister Dilma Rousseff told the local press.

Petrobras Pres. José Dutra added, "Petrobras has every interest in continuing in Bolivia. We are awaiting the conclusion of this debate."

A Petrobras source, who requested anonymity, told OGJ, "If the hydrocarbons bill is approved by the Senate we fear that in the future Bolivia's exports of 21 million cu m/day of gas to Brazil may be interrupted."

Petrobras is the largest investor in Bolivia (OGJ Online, Mar. 17, 2005).

Bolivia's lower house reapproved the controversial article Mar. 16 in the bill that adds a 32% tax to the existing 18% royalty on hydrocarbons production by foreign companies.

The opposition Movement Toward Socialism (MAS) party, led by Evo Morales, wanted the government to charge a 50% flat royalty on all hydrocarbon production.

The article dealing with the royalty-tax issue was the final article of the 142-article hydrocarbons bill to be passed by the lower house. The entire bill is now on its way to the senate for final approval.

The newspaper La Razón quoted the president of the Bolivian subsidiary of Spain's Repsol YPF SA, Julio Gavito, as saying that if the bill becomes a law, "it would oblige us to abandon many of our projects, and everybody would lose, especially Bolivia. It would also be necessary to reconsider new investments that we have earmarked for the next few years."

Repsol YPF and Petrobras are partners in the gas fields San Alberto and San Antonio, which supply 70% of the natural gas sold to Brazil.

Senate ratification of the hydrocarbons bill would make the political position of President Carlos Mesa unsustainable, many analysts say. Mesa has already offered his resignation, saying the bill will cause multinational oil companies to take Bolivia to court.

Mesa considers the bill unviable and isolationist. Congress rejected his resignation, but approval of the hydrocarbons bill in the Senate might pave the way for the election of congressman Morales as president in 2007.