Peter Howard Wertheim
OGJ Correspondent
RIO DE JANEIRO, Nov. 2 -- Bolivia President Evo Morales claimed a victory Oct. 29 when key foreign energy companies agreed to remain in Bolivia, operate under state control, and cede larger shares of profits to the government.
The deals strengthen Morales's bid to give Bolivia a larger role in its own economy: It has the continent's second-largest natural gas reserves after Venezuela yet remains South America's poorest country.
With these new contracts, Juan Carlos Ortiz, president of Bolivia state-owned Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), estimated that the state will receive an additional $1.3 billion/year in revenues. Morales said these revenues could be increased to as much as $4 billion within 4 years, when Bolivia begins exporting 30 million cu m/day of gas to Argentina.
According to Ortiz, the contracts also guarantee that the country will receive investments of as much as $2 billion. They came 10 days after Morales and Argentine President Nestor Kirchner signed a $17 billion deal significantly expanding Bolivia's gas exports to Argentina over the next 20 years.
Ortez said the former contracts, which granted ownership of hydrocarbon production and commercialization for the investor companies, violated the Bolivian Constitution but now can be approved by the Legislative. Now YPFB takes on a more preponderant role in the commercialization of hydrocarbons produced (OGJ Online, Nov. 1, 2006).
Henceforth, YPFB will supervise operations of foreign oil companies more closely and will participate in the administration of the fields, accompany the accounts through quarterly reports, participate in profits, supervise tender bids for goods and services, grant approval for the value of operating costs and capital expenditures, becoming "more like a partnership," said Brazilian governmental authorities.
Ortiz added that the megafields will yield government take above 80%, although there will be variations, while smaller fields will yield less than 80% but more than 50%, defined on a case-by-case basis, according to production capacity and other conditions. The contract period for fields with lower production also varies, from 22-31 years.
Company reactions
While Petrobras is the largest gas producer in Bolivia, Repsol YPF SA and its subsidiary Andina control the largest share of Bolivia's known 55 tcf of gas reserves, with 35%. Petrobras controls 16% and Total SA, 14%.
The new contract will allow Petrobras an average earning capacity of 15% over E&P activities, "way above our capital costs," said Petrobras Pres. José Sergio Gabrielli. Petrobras maintained its rights to explore on the Rio Hondo, Ingre, and Irenda blocks but did not change its contracts related to the exportation of 26 million cu m/day of gas from Bolivia to Brazil. Negotiations over the gas price are set to resume next month in Rio de Janeiro.
The two countries also have not yet agreed on the price for indemnity due to nationalization of two Petrobras-operated refineries that process a total of 60,000 b/d of oil: Gualberto Villarroel (Cochabamba) and Guillermo Elder Bell (Santa Cruz de La Sierra). Petrobras bought the plants 7 years ago for some $100 million.
The Spanish press quoted Repsol YPF Chairman Antoni Brufau as saying its agreement clarifies past uncertainty "and allows us to invest with the necessary legal safeguards, validating the interests we already have." Repsol YPF and Bolivian subsidiary Andina have invested $1.17 billion in the country.
BG Group PLC, which has invested £100 million in Bolivia and produces 60 MMcfd of gas, said the new contract assures a return on current investments, but "new investments will be analyzed on a case-by-case basis."
Morales said on Oct. 28 that Total also would remain and spend about $2 billion exploring for and producing gas from three large fields.
The contracts signed with 10 foreign oil companies will now be submitted to the Bolivian Congress for ratification.
