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Bolivian Nationalizes the Oil and Gas Sector
By PAULO PRADA
Published: May 2, 2006
http://www.nytimes.com/2006/05/02/world/americas/02bolivia.html?_r=2&th&emc=th&oref=slogin&oref=login
RIO DE JANEIRO, May 1 — President Evo Morales of Bolivia ordered the
military to occupy energy fields around the country on Monday as he placed
Bolivia's oil and gas reserves under state control.
Surrounded by soldiers at an oil field operated by the Brazilian energy
giant Petróleo Brasileiro, or Petrobras, Mr. Morales ordered foreign
producers to relinquish control of all fields and channel future sales of
hydrocarbons through the state-owned energy company.
He gave foreign companies 180 days to renegotiate existing contracts with
the government, or leave the country.
"The time has come, the awaited day, a historic day in which Bolivia retakes
absolute control of our natural resources," Mr. Morales declared, according
to The Associated Press. "The looting by the foreign companies has ended."
The decree is the latest step by Latin America governments from Venezuela to
Ecuador to assert greater control over the energy sector, moves that have
sent shivers through foreign producers.
Motivated by nationalist politics and soaring oil and gas prices,
governments have seized an opportunity to gain higher revenues while
parlaying their control over future energy supplies into greater political
leverage, both at home and abroad.
"Governments in the region see energy as a commodity they can use to push
populist agendas," said Adriano Pires, director of the Brazilian Center for
Infrastructure Studies, an energy consultancy in Rio de Janeiro.
"From a political point of view, it's a powerful issue to manipulate, but
from an industrial point of view, it can do real harm."
Mr. Morales's decree, in effect to nationalize Bolivia's energy industry,
which includes the second-biggest gas reserves in Latin America after
Venezuela, quickly added to the nervousness of foreign producers.
They said they would proceed with caution until the government clarified
under what conditions it plans to renegotiate contracts.
"We're worried," said Begońa Elices, director of external relations in
Madrid at Repsol YPF S.A., the Spanish oil company, the second biggest
investor in Bolivia's gas sector. "There will be a lot of fine print to
consider."
Petrobras, the biggest investor, with over $1 billion invested in Bolivia,
criticized the government's "unilateral attitude" and said it would take
whatever steps necessary to "protect the rights of the company" and
guarantee Brazil's supply of gas, half of which comes from Bolivia.
The importance of Bolivian gas to Brazil — the largest market in the region
— prompted concern even from President Luiz Inácio Lula da Silva, a leftist
and former union leader who publicly hailed Mr. Morales's rise to power.
Mr. da Silva is to meet with José Gabrielli de Azevedo, chief executive at
Petrobras, on Tuesday, along with senior officials from Brazil's Ministry of
Mines and Energy.
The Bolivian announcement fulfilled a campaign pledge that helped Mr.
Morales rise to power last December. It was foreshadowed last year when
Bolivia approved a major increase in the royalties paid by foreign producers
for the right to operate in the country.
In April, President Hugo Chávez of Venezuela, a mentor to Mr. Morales,
seized two oil fields operated by the Total group, of France, and Ente
Nazionale Idrocarburi, of Italy, because they were unwilling to give more
control of their operations to Petróleos de Venezuela, the state-run energy
giant.
But Mr. Morales's step on Monday was the most assertive yet, and many
industry observers feared such moves would scare away investors and
jeopardize the region's economies.
"This isn't like Saudi Arabia, which over the years has developed a know-how
to dominate the industry independently," said Gal Luft, co-director of the
Institute for the Analysis of Global Security, a consultancy in Washington
that studies energy issues.
"When you cause problems for foreign investors, you cause problems for those
who know how to create and develop the industry."
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