Bolivia nationalizes oil and gas industry

May 2, 2006
Bolivian President Evo Morales decreed the nationalization of gas and oil industries on May 1.

Peter Howard Wertheim
OGJ Correspondent

Rio de Janeiro, May 2 --Bolivian President Evo Morales decreed the nationalization of gas and oil industries on May 1, dispatching troops to oil and gas fields, refineries, and strategic points along pipeline routes.

He spoke at San Alberto gas field, operated by Brazil's state-owned Petroleo Brasileiro SA (Petrobras) in the southeast of the country.

All companies were told to turn production over to the state's Yacimientos Petroliferos Fiscales Bolivianos (YPFB). Morales threatened to evict foreign companies unless they agreed to surrender ownership to the state within 6 months.

YPFB once produced the country's natural gas but was reduced to an administrative capacity in a mid-1990s privatization of Bolivia's gas exploration and production business.

Soldiers peacefully took control of the Palmasola refinery in the eastern city of Santa Cruz, some carrying submachine guns, others antiriot gear. Most stood in front of the gates of the refinery, which is also run by Petrobras, the largest investor in Bolivia's oil and gas business, reported Brazil's largest circulation daily O Globo.

The government sent soldiers and engineers to 56 locations—including gas fields explored by foreign companies such as Britain's BG Group PLC and BP PLC, Petrobras, Repsol YPF SA, Total SA, and ExxonMobil Corp.

According to the new rules decreed by Morales, wellhead taxes will increase to 82% from 50%. YPFB will be restructured and get majority control of fields and refineries. The government will appoint top executives of non-Bolivian oil companies.

In addition, YPFB will make decisions about volumes, prices, and destinations of oil and gas products. "With this decree, the state now controls the administration, production, transport, warehousing, distribution, sale and industrialization of hydrocarbons," Morales said.

It was not immediately clear whether the government would indemnify foreign companies.

Brazil relies heavily on gas imports from Bolivia (OGJ Online, Apr. 5, 2006).