Bolivian president gives ultimatum to France's Total

Bolivian President Evo Morales has given France's Total an ultimatum to fulfill its investment obligations in his nation's natural gas industry or face punitive action by the state.

Feb 20th, 2009

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 20 -- Bolivian President Evo Morales, armed with new backing from Russia's OAO Gazprom, has given France's Total SA an ultimatum to fulfill its investment obligations in his nation's natural gas industry or face punitive action by the state.

"We've demanded the investments be made immediately," Morales said, adding that if the company is not willing to do so, then his country "has all the right to take decisions to invest."

Morales said he met with high-ranking Total executives on his recent trip to Europe, asking them to expedite their investments in Bolivia and comply with the contracts they have signed with the government.

The pressure on Total SA followed Morales' Feb. 16 visit to Moscow, where he and Russian President Dmitry Medvedev signed agreements for the development of Bolivia's hydrocarbons, its natural gas in particular.

"Russia and Bolivia agreed to cooperate in extraction of hydrocarbons and development of the gas infrastructure," said Medvedev, adding: "A memorandum with Gazprom has been signed, and it paves the way for practical action."

Morales' administration has often demanded that international oil companies carry out new projects to boost natural gas output in an effort to meet growing demand.

Bolivia exports most of its gas to neighboring Brazil and Argentina, but a small amount—which Morales wants to increase—remains for domestic consumption.

In addition to Total SA, Brazil's Petrobras and Repsol YPF of Spain also operate in Bolivia's gas fields.

The companies say they face the uncertainty that their contracts will be adversely affected by Bolivia's new constitution. The contracts went into force in 2007 after Morales nationalized the industry in 2006.

The new constitution, enacted earlier this month, grants greater rights to indigenous Bolivians, limits the size of landholdings, and establishes that the state controls all mineral and oil and gas reserves.

However, Morales said the current oil contracts in Bolivia will not be modified under the new constitution. Instead, he said, the constitution refers to future contracts, which will not differ substantially from the current ones.

Contact Eric Watkins at hippalus@yahoo.com.

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