Bolivia: Foreigners may not export products

Bolivia's President Evo Morales has issued a decree that forbids Brazil's state-owned Petroleo Brasileiro SA (Petrobras) and other foreign companies from exporting certain oil products, making continued refinery ownership unlikely.

Peter Howard Wertheim
OGJ Correspondent

RIO DE JANEIRO, May 8--Bolivia's President Evo Morales has issued a decree that forbids Brazil's state-owned Petroleo Brasileiro SA (Petrobras) and other foreign companies from exporting certain oil products.

Henceforth only Bolivia's state-owned Yacimientos Petroliferos Fiscales Bolivianos (YPFB) will be able to export oil products.

As a result of the Morales decree, Petrobras offered to sell Bolivia 100% of its two refineries that Bolivia nationalized last year along with hydrocarbons resources (OGJ Online, May 2, 2006).

Before Morales' decree Petrobras was negotiating the sale of 70% of its refineries to Bolivia and expected to retain 30%.

Bolivia will have 2 days to respond to the May 7 sale offer, said Petrobras Pres. José Gabrielli, adding that Petrobras would seek international arbitration if an agreement couldn't be reached. He said it was "practically impossible" that Petrobras would make new investments in Bolivia.

Brazil's Foreign Ministry released a statement saying the decree could eventually have a "negative impact" on cooperation between the two nations.

Petrobras wants a fair price for the refineries it owns and operates: the Guillermo Elder Bell in Santos Cruz and the Gualberto Villarroel in Cochabamba. The two refineries together process 40,000 b/d of oil and handle 90% of Bolivia's oil and gas for domestic consumption (OGJ Online May 2, 2007).

Bolivia Vice-President Alvaro Garcia Linera also skewered the drawn-out price negotiations between Bolivia and Brazil, saying in a radio broadcast that Bolivia will pay only $60 million for the refineries, while Petrobras wants $200 million.

Bolivian government sources have threatened to confiscate the refineries, which Petrobras bought in 1999 for $102 million and in which it has since invested another $100 million.

Brazil's Energy Minister Silas Rondeau confirmed that Petrobras could seek arbitration if it and Bolivia don't reach a deal. He suggested that a company such as Venezuelan state-run oil firm Petroleos de Venezuela (PDVSA), working with narrower profit margins, could take over operation of the refineries.

Petrobras, the biggest investor in Bolivian gas, purchases 70% of Bolivia's natural gas output, importing some 25 million cu m of gas/day through the 3,150 km Bolivia-Brazil gas pipeline.

YPFB will run Bolivia's oil and gas pipelines and domestic sales and exports, said company Pres. Guillermo Aruquipa. The 44 new contracts signed recently by a dozen oil companies, including Petrobras, Repsol YPF SA, and British Gas, will yield $2 billion in 2007 said Arequipa.

Bolivia's Hydrocarbon Chamber said investment in Bolivia's oil and gas industry fell to $120 million last year from $650 million in 2002. The chamber represents 100 companies operating in Bolivia.

Bolivians not helped
One year after nationalizing its oil and gas sector, Bolivia has not yet placed a single boliviano (Bolivia's currency) into the people's pockets, say economic analysts.

"The resources from higher taxes and royalties are not reaching the majority of the population, which is very poor, despite the fact that from the macroeconomic point of view Bolivia is in a good situation," said economist Gonzalo Chavez, head of the economics and development department of Bolivia's Catholic university.

Bolivia said that with the revision of natural gas contracts, the country received $1.6 billion last year. Revenues from gas royalties and taxes before the nationalization were $600 million.

After the 2006 nationalization, Bolivia renegotiated contracts, signed on May 2, with foreign oil and natural gas firms operating within the country. The new contracts award the government an average of 82% revenues for natural gas and oil operations in Bolivia over the next 20-30 years.

Bolivia classifies these firms as "service providers" to YPFB. Petrobras describes the contractual arrangements differently, saying it is a "production partner" with YPFB. This divergence in the way the contracts are publicly portrayed has not become an open argument between the two, but it suggests the possibility of conflicting interpretations in later disputes.

Government statistics show that in 2006 Bolivia went through an external shock. For the first time in 5 years, exports that previously had not surpassed $1.8 billion jumped to $4.2 billion. Inflation dropped and the country's international reserves tripled, which led Bolivia to not renew its bridge loan with the International Monetary Fund.

Nevertheless Bolivia continues to be the poorest country in Latin America, and the hydrocarbons nationalization has yielded more political rhetoric than improvement to the lives of average citizens, say economic analysts.

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