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Bolivia shocks world with gas nationalization { April 2006 }

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Bolivia gas move met with shock
Last Updated: Tuesday, 2 May 2006, 11:26 GMT 12:26 UK

Brazil and Spain have reacted sharply to a decree from Bolivia's President Evo Morales which asserts state control over the country's energy industry.
Under the May Day decree, private energy companies will have to sell a controlling stake to the Bolivian government and renegotiate contracts.

At the largest gas fields, royalty payments will increase from 50% to 82%.

The fate of Bolivia's gas reserves was at the heart of protests which saw two presidents thrown out of office.

Mr Morales' move is the fulfilment of an election promise to secure better benefits for impoverished ordinary Bolivians from the gas reserves - the second largest in the continent.

Hundreds of Bolivians celebrated the decree in the de facto capital, La Paz, on Monday.

But the private gas companies, which have invested about $3.5bn in gas exploration and development since 1997, say it is a worrying development.


A spokesman for Petrobras, one of the largest foreign investors in Bolivia, called it an "unfriendly" action.

Brazilian President Luiz Inacio Lula da Silva was said to be meeting Petrobras President Jose Sergio Gabrielli and government ministers for urgent talks on Tuesday.

Spain's Repsol YPF is also a big player in Bolivia, and the Spanish government expressed "deep concern" at the move.

The US Exxon Mobil Corporation said it was "closely monitoring" the situation.

Other major international corporations operating in Bolivia include the British companies British Gas and British Petroleum and France's Total.

The firms will get less favourable terms but current high global energy prices may be an incentive to see if they can work with Mr Morales, the BBC's Americas editor Simon Watts says.

Contracts redrawn

Under the terms of Decree 28701, the Bolivian government has declared absolute control over the country's energy resources and radically altered the conditions of its relationship with the energy companies.

Companies have six months to negotiate new contracts with the Bolivian government. During that time, the Bolivian government says it will carry out audits of each company to determine how much it should pay for a stake of at least 51% in each.

Bolivia's state-owned energy company, YPBF, will take control of the production, transport, refinery, and sale of the gas.

With immediate effect, gas fields producing more than a daily 100 million cubic feet of gas will retain only 18% of the gas they produce, down from 50%. This is reported to apply to two fields, San Alberto and San Antonio.

Companies operating other fields will retain 40%, local media report.

Speaking at an oilfield in the south of the country on Monday, Bolivia's left-wing president called it an "historic day".

"The pillage of our natural resources by foreign companies is over," he declared.

About 100 soldiers peacefully took control of the Palmasola refinery in the south-eastern city of Santa Cruz, reported the news agency Associated press.

The government said soldiers and engineers were sent to 56 locations around the country.

Mr Morales said the gas fields were "just the beginning, because tomorrow it will be the mines, the forest resources and the land".

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