alternative reader no. 129

Bolivia Defends Gas Industry Takeover

Bolivia has defended its decision to nationalise its natural resources amid concern and criticism from Europe and oil and gas companies.

BY AL JAZEERA
Posted by Bulatlat

Evo Morales, the Bolivian president, ordered soldiers to "guard" oil and gas fields on Monday until terms for nationalising the industries are agreed with foreign companies.

The move provoked concern from the Spanish government and Repsol, one of the biggest foreign investors in Bolivia.

The Spanish foreign ministry released a statement on Tuesday expressing "deep concern about the measure and the possible consequences for bilateral relations. This concern also extends to the ways this measure was adopted".

Antonio Brufau, the chairman of Repsol, speaking on Argentinian radio, said: "It's an unjust measure against the international companies that have been working in Bolivia."

Luiz Inacio Lula da Silva, the Brazilian president, said: "Bolivia has a vast situation of poverty, and it is fair that the president of Bolivia defends interests to improve the quality of life of his people."

However, his spokesman confirmed on Tuesday that Lula will consult other South American leaders on the situation.

'Normal profits'

Alvaro Garcia Linera, the Bolivian vice-president, defended his country's economic stance.

"The [international gas] companies are going to keep making  money, but now they will be normal profits," he said on Bolivian television.

"Before the decree, operating in Bolivia was like winning a lottery because their profits were abusive."

It was not immediately clear if or how production would be  affected by Morales' order.

Troops seized 56 oil and gas fields after the nationalisation decree. Bolivia holds Latin America's second largest gas reserves after Venezuela.

Under the decree, the state-run Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) will become the majority shareholder in reformed corporations.

Andres Soliz, the Bolivian oil and gas minister, said fields were operating normally, but under government supervision. That will continue, he said, "as long as there is no resistance from the oil companies to comply with the nationalisation decree".

Constraints

The nationalisation of the Bolivian energy industry is a fresh blow to international oil companies already facing increased constraints imposed by oil-and gas-rich countries anxious to exert greater control over access to their resources.

The move by Morales is part of "a nationalist movement in the oil and gas sector in Latin America, led by Venezuela and Brazil, that could spread to Mexico," said Nicolas Sarkis, an industry expert with the publication Petrole et Gaz Arabes.

"Before the decree, operating in Bolivia was like winning a  lottery because their profits were abusive"

Sarkis said the Bolivian nationalisation was "a worrisome sign for the future, since countries where companies can operate freely are becoming fewer and fewer".

Russia, which sits on huge natural gas reserves, authorises foreign investment - but on condition that Russian groups hold 51% of the exploration contracts.

In Iran, the world's fourth largest oil producer, the constitution forbids the granting of concessions to foreign companies in order to safeguard national access to the country's resources.

Logical

Even in producers such as Saudi Arabia where there is no legislation severely constraining oil firms, foreign oil companies in general are obliged to form partnerships with local enterprises, according to sources at one international oil group.

For Pierre Terzian of the magazine Petrostrategies, the Bolivian decision is "logical" at a time when crude oil prices are over $70 a barrel.

Each time crude prices surge, oil producers hike taxes to ensure that the oil companies are not alone in enjoying healthier profits, he said.

"For the first time in history this is happening at a moment when the world has a great need to increase investment in new production capacities."

But he sought to put the Bolivian overture in historical context, noting that in previous nationalisation movements, such as in Iraq and Algeria in the 1970s, "the big companies always adapted".

2 May 2006

Posted by Bulatlat

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