By Franz Chávez
LA PAZ, Apr 6 2007 (IPS)

In the face of gas shortages, Bolivians are criticising the way the nationalisation of the country’s energy reserves is being carried out, and social activists have once again begun to demand the outright confiscation of the assets of the 12 foreign oil companies operating here.

The companies had signed a total of 44 contracts with the Bolivian government of Evo Morales in October 2006, ceding control over their operations here, and agreeing to pay a significantly higher proportion in royalties and taxes.

But errors in the drafting of the new contracts and the negotiation of secret appendices by the government team prompted an investigation by the Senate which has brought to light new aspects of the complex process that began on May 1, 2006 when the leftist Morales declared that his government was nationalising the country’s abundant natural gas reserves.

The additional revenues that were to be brought in by the increase in royalties and taxes, and the nationalisation process itself, have thus been called into question.

“Stating that oil industry revenues would climb from 39 to 81 billion dollars (in 30 years) was irrational,” Carlos Arce, a researcher at the Centre for Studies on Labour and Agrarian Development, told IPS, questioning the official announcements on the new gas contracts.

Arce’s reasoning is simple: through the 50 percent tax on oil industry production levied by a law that went into effect under the previous administration, an estimated 39 billion dollars in revenues would have been taken in over the next three decades.

On May 1, 2006, Morales announced the nationalisation of Bolivia’s energy reserves and an increase in taxes and royalties from 50 to 82 percent in the case of the major gas fields that supply Brazil with 27 million cubic metres of natural gas a day.

The measure, however, did not involve the confiscation of the foreign oil companies’ industrial installations, such as refineries or pipelines, and was based on a renegotiation of contracts, in order to turn the foreign companies into service providers for the state-run Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) oil company.

The 12 foreign firms operating in Bolivia include Brazil’s Petrobras, Pluspetrol from Argentina, the British Gas Bolivia Corporation and Petroleum-Amoco, the Spanish-Argentine Repsol-YPF, France’s Total, and the U.S.-based Vintage Petroleum.

The restoration of state ownership of the natural gas reserves that were privatised in the 1990s and the promised increase of hundreds of millions of dollars in annual revenues was the most popular measure taken by Morales in the first few months of his administration, which took office in January 2006.

But the hasty negotiation of the new contracts, which were signed in late October, calmed foreign investors down, because they obtained advantages like the reimbursement of operating costs, which will reduce the revenues taken in by the state coffers by an amount that has not yet been calculated, said Arce.

In the best of cases, companies will pay up to 60 percent in taxes and royalties, rather than the 82 percent promised by the government, said the analyst.

Executives of Petrobras, Repsol-YPF and Total admitted to the Senate investigation committee that they had obtained certain advantages and compensations in the negotiations, such as the recuperation of investment costs.

The details of the negotiations with the foreign oil companies are coming to light just as Bolivians are suffering a scarcity of liquefied petroleum gas (LPG) in the main cities.

Petrobras, meanwhile, which holds the concessions to Bolivia’s biggest gas fields, has refused to make new investments to ensure that domestic demand is covered.

The Brazilian oil giant has been able to pay less attention to Bolivian consumers because the new contracts failed to include a clause making it obligatory to attend the needs of the domestic market first, said Arce, who argued that the lack of such a clause merely stimulated exports to Brazil and Argentina.

Long queues of homemakers trying refill their LPG cooking gas cylinders and roadblocks mounted by protesters who are tired of the gas shortages are ironic in a country with an estimated 48 trillion cubic feet of natural gas, the second-largest reserves in South America after Venezuela’s.

In the meantime, the Senate has failed to come up with a legal formula that would correct the errors in the contracts, in order to prevent the oil companies from bringing lawsuits against YPFB in the future.

The 15,000 pages of the contracts were already approved in November, thanks to the governing Movement to Socialism (MAS) party’s majority in the legislature. But the lawmakers were criticised for failing to carry out an in-depth analysis of the contracts.

The errors were detected after the contracts went to the public notary’s office, which meant they had to be sent back to Congress, where opposition lawmakers took a closer look and found further shortcomings as well as details that had been kept secret by the government negotiating team.

The first political cost was the Mar. 23 dismissal of YPFB president Manuel Morales (no relation to the president), an influential politician who was appointed to the post on Jan. 26.

Morales’ performance at the head of YPFB will be investigated by the public prosecutor’s office at the Senate’s request, as will Energy Minister Carlos Villegas and other members of the team that negotiated the new contracts.

YPFB’s new president, Guillermo Arequipa, is the fourth person to head the company since Morales came to power.

The detection of errors in the contracts has cast doubt on the nationalisation process itself, because YPFB failed to reassume direct control over production as expected. On the contrary, the foreign firms have consolidated their concessions.

“The people have been lied to. The contracts were merely modified a bit, and now we will have to nationalise the natural gas reserves by means of confiscation without compensation,” city councillor Roberto de la Cruz told IPS. The activist sits on the town council in El Alto, a sprawling working-class city next to La Paz.

De la Cruz, who was one of the leaders of the month-long protests over natural gas that toppled the government of Gonzalo Sánchez de Lozada in October 2003, delivered a letter this week to the deputy minister for Social Movements, Sacha Llorenti, demanding explanations for the shift in direction that the nationalisation process has taken.

“The government held a symbolic act when it took over the San Alberto gas field in the southern department of Tarija, and put on a big theatrical act to maintain its level of social support,” said Arce, referring to the deployment of troops to gas fields, refineries and petrol stations overseen by the president himself on May 1, 2006.

The foreign oil companies’ condescending attitude towards the new analysis of the contracts in Congress conceals their aim to gain the right to indemnification in case the industry is really nationalised, Mirko Orgaz, a civic leader in the southeastern gas-producing region of Camiri, told IPS.

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