Peter Howard Wertheim
OGJ Correspondent
RIO DE JANEIRO, Jan. 23 -- Evo Morales, Bolivia's first indigenous president, spoke when he took office Jan. 22 of nationalizing natural gas reserves but not international oil companies' installations and of welcoming foreign investors as long as the country receives a "fair price" for gas.
Morales, a former leader of Bolivia's coca-growers union, rose to power leading protests, as Bolivia's poor became disillusioned with free market reforms and privatization of everything from oil to water. He is an admirer of Cuban leader Fidel Castro and Venezuela President Hugo Chavez, an avowed socialist.
Bolivia has 24 tcf of gas reserves, second largest in Latin America after Venezuela with 151 tcf.
Chavez has announced that state-owned Petroleos de Venezuela (PDVSA) will open an office in La Paz, Bolivia's capital, to help revive Bolivia's state-owned Yacimientos Petroliferos Fiscales Bolivianos (YPFB).
Chavez said he will provide YPFB workers trained in production and refining. He also said his government will provide 150,000 bbl/month of diesel to Bolivia in exchange for agricultural products.
On Jan. 22, Morales repeatedly said his job as president is to do good business for Bolivians. That has led to speculation he may govern less like Chavez and more like Brazilian President Luiz Inacio Lula da Silva, who was elected on a leftist platform but has embraced orthodox fiscal policy.
Brazil's state-owned Petroleo Brasileiro SA (Petrobras) has invested $1.5 billion in Bolivia since 1997. Petrobras owns gas fields and two refineries, which it bought from Bolivia for $100 million each. Bolivian government sources told OGJ that Morales is rethinking his campaign promises of buying back the refineries.
Brazil imports about 24 million cu m/day of gas from Bolivia—about half of its consumption and expects Bolivia's new government to raise gas prices. Petrobras Pres. Sergio Gabrielli admitted that the company will undergo a reduction in profit margins but said, "Some profits are better than no profits."
Morales has discussed conversion of gas production contracts with international producers to give the state a 50% claim on profits and control over gas sales. Under current contracts and the 1996 hydrocarbons law that privatized the industry, private companies controlled production and sale of oil and gas and paid 18% royalties and no taxes.
Some of the major oil companies operating in Bolivia have threatened to file claims in international arbitration against the proposed changes. Bolivia also faces the possibility of lawsuits if it nationalizes the oil and gas industry.
For now, foreign oil and gas investments totaling almost $7 billion are thought to be in suspense pending Morales's moves and negotiations between his government and international oil companies.
Investment of more than $2 billion is estimated to be needed to double Bolivia's gas production to 80 million cu m/day. The gas grid for exports needs to be expanded. Brazil's Petrobras has shelved its $1.5 billion investments for a gas-chemical project in partnership with the pribate Brazilian petrochemical company Braskem and a fertilizer producer budgeted at $700 million.
Morales already appears to be backing away from some of his more extreme campaign rhetoric, including his earlier opposition to US-sponsored trade initiatives. He says he no longer rules out a free-trade deal with the US and three other Andean nations.
