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ENERGY-BOLIVIA: Taming the Giants
By Franz Chávez
LA PAZ, Sep 11, 2006 (IPS) - Four and a half months after Bolivian President Evo Morales seized control of the country's natural gas fields, escorted by elite troops, he is now waging his second and final battle to force the foreign oil companies to sign new contracts by Nov. 1.
With the difficulties to be expected in the leftist Movement to Socialism's (MAS) first experience in governing the country, and a handful of victories - such as the administration's success in negotiating with the Argentine government a hike in the price of natural gas exports, from three to five dollars per 1,000 BTU (British Thermal Unit) - the Bolivian government is playing its final card at the negotiating table, in the nationalisation of the natural gas reserves.
The first to sit down at the table for a round of talks last week was Total E&P Bolivia, a subsidiary of French oil giant TotalFinaElf, one of the 11 companies involved in the natural gas industry in Bolivia, whose 48 trillion cubic feet of gas are the second largest reserves in South America after Venezuela's.
"We are pleased by the fact that the dialogue (with the oil companies) is taking place in the context of the nationalisation of energy reserves," Energy Minister Andrés Soliz told IPS.
Soliz, a journalist and lawyer who has dedicated much of his life to defending the country's energy resources, was a fierce critic of former president Gonzalo Sánchez de Lozada (1993-1997 and 2002-2003), who pushed through the privatisation of the industry. Soliz accused the former president of illicit enrichment.
According to government sources, Soliz and his advisers are talking privately about two alternatives for the companies to choose from: a joint venture with Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) - Bolivia's state oil company - in which foreign companies extract the gas while YPFB owns each stage of the production process and markets the product, or investing without participation by the Bolivian state, and assuming all risks.
On May 1, Morales declared that the foreign oil companies had 180 days to renegotiate their contracts under new terms.
Without expropriating the actual assets of the oil companies, and renationalising only the natural gas reserves themselves, the government plans to rebuild the gutted YPFB. But it must first get the foreign companies to renounce ownership of the gas they extract, for which they have been paying the state 50 percent in royalties and taxes. (Prior to 2005, they were paying just 18 percent royalties).
Under the nationalisation decree, large gas fields that produced more than 100 million cubic feet of gas a day are to pay the state 82 percent in royalties and taxes, while the smaller fields will continue to pay 50 percent.
The government was pleased to receive its first payment, of 32.3 million dollars, in late August from Brazil's state-owned oil giant Petrobras, the Spanish-Argentine Repsol YPF, and Total, to cover the extra 32 percent tax. But to obtain that payment, Soliz had to lay down an ultimatum.
These three companies exploit the rich San Alberto and San Antonio gas fields in the southern province of Tarija, which generate 70 percent of the 26.5 million cubic metres of gas exported daily to the southern Brazilian state of Sao Paulo.
On Friday, Brazil's state oil giant Petrobras will become the second company to negotiate with the Morales administration.
While Argentina buys 7.7 million cubic metres a day of natural gas at a price of five dollars per 1,000 BTU, since the negotiations between Morales and President Néstor Kirchner, Brazil is resisting paying more than the four dollars it currently pays.
And Petrobrás' repeated refusals to pay more were accompanied last week by an intense media campaign which stressed the "revolutionary" role the Brazilian firm has played in Bolivia's energy industry, in which it has invested 1.5 billion dollars.
In an interview granted to a local newspaper, the president of Petrobras Bolivia, José Fernando de Freitas, said the Bolivian state would have to pay if it wanted to gain control over the company's refineries in Bolivia, and that in the case of a joint venture in which Petrobras does not have a controlling share, the Brazilian company would insist on running the firm.
The nationalisation of Bolivia's energy reserves forms part of a broader movement for the restoration of state control over natural resources that emerged in the country's impoverished rural zones and the working-class city of El Alto next to La Paz, which was at the centre of the month-long protests that forced president Sánchez de Lozada to resign in October 2003.
The popular uprising demanding the nationalisation of the country's natural gas and water also toppled the government of Carlos Mesa (2003-2005), who was temporarily replaced by Eduardo Rodríguez. Morales then won a landslide victory in December 2005, garnering 53.7 percent of the vote.
It has not been easy for the Morales administration to reach the phase of negotiations with the companies. Along the way, it has also had to deal with shifts in public opinion after opposition parties accused influential MAS leader Jorge Alvarado, who presided over YPFB, of violating the terms of the nationalisation decree by exporting gas through an independent Brazilian firm.
Alvarado was replaced by Juan Carlos Ortiz, in a measure that shook the nationalisation of the natural gas industry. Thus, the newly strengthened YPFB has reached the negotiations in a vulnerable position.
Alvarado's conduct was criticised by the Senate which, by a slight majority of votes cobbled together by the right-wing opposition parties, also censured Minister Soliz over the limited progress made by the nationalisation process.
But the minister, who is highly popular according to opinion polls, was ratified in his post by the president, who blamed the censure motion on a plan by the oil companies to hinder the nationalisation process.
(END)
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