Bolivia’s newly elected government expects to sign new oil contracts

Leftist government says country looking to retain 50% of oil and gas royalties under new contracts

Harold Olmos

Associated Press Writer

Bolivia’s newly elected government expects to sign new gas and oil contracts within months under which one of Latin America’s poorest countries will retain more energy revenues, the vice president-elect said.

Alvaro Garcia Linera said Jan. 12 that contracts ensuring Bolivia retains 50 percent of all oil and gas royalties have already been circulated to companies like Brazil’s Petroleo Brasileiro SA, Spain’s Repsol YPF and France’s Total SA and could be signed within the “next few months.”

“They will keep making money, they will sign the new contracts,” Garcia Linera said.

The current contracts, under which foreign oil companies have operated in Bolivia since mid-1990s, will be revised with new formulas for shared production, service contracts and greater association with government oil company Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, he said.

Petroleo Brasileiro, or Petrobras, and other oil giants have expressed unhappiness with the new rules passed last year by the Bolivian Congress, but all have indicated they will keep working in Bolivia, Garcia Linera said.

He warned that any firms that committed tax or administrative fraud in the past would be punished and have their contracts canceled. He didn’t name any companies, but said the new administration would conduct full investigations on possible irregularities.

“We will be a strong government. There will be fines and, if the law dictates, repossession of areas granted to firms that infringed national rules,” Garcia Linera said.

Natural gas to main customers guaranteed

Bolivia’s vice president-elect came to Brazil to join leftist President-elect Evo Morales in talks with Brazilian President Luiz Inacio Lula da Silva and other top officials, including Petrobras executives.

Morales arrived at dawn Jan. 13 from a 10-day international tour that took him to Europe, China and South Africa, during which he repeatedly pledged respect for private investment and asked for cooperation in his plans to fight rampant poverty affecting two thirds of Bolivia’s 8 million people.

Morales, Bolivia’s first Indian president who is scheduled to take office Jan. 22, will spend just a few hours in Brazil.

He is expected to lay the groundwork for massive Brazilian investment in petrochemical plants, pipelines and roads.

Oil companies accused of ‘sacking’ Bolivia

YPFB, recreated last year after being privatized in the 1990s, alone poured US$390 million annually into Bolivian government coffers, while revenue from all foreign firms was only slightly more, US$410 million.

He said in 2005 there was improvement, but revenues from the foreign oil companies operating in Bolivia amounted to only US$110 million more than what the national oil corporation alone contributed.

“With alleged investments of US$3.5 billion, that’s all they have been providing to the Bolivian state,” Garcia Linera said.

He also said the companies worked mostly in already known oil-producing areas and have carried out very little exploration.

The new leader estimated that one-third of the country’s proven reserves are committed for sale to Brazil and Argentina. Another third is expected to go to petrochemical plants and satisfy domestic demand. The rest could be exported to Bolivia’s neighbors or to Mexico’s Pacific coast and California, in the United States, he said.

“This possibility of exporting via the Pacific Ocean is still open, but the timetable for it is short,” he said. “It will eventually depend on agreements with Peru.”

Bolivia, one of two landlocked South American countries, would have to run a pipeline through Peru to ship the gas in its liquefied form. Garcia Linera ruled out running the pipe through Chile because of an old conflict that left Bolivia without direct access to the Pacific.