Bolivia's Oil Nationalization Moves Forward

Source: ASSOCIATED PRESS; Bolivia Negotiates Oil Nationalization
September 5, 2006

The Bolivian government began to implement its plan to nationalize the country’s hydrocarbon industry this week by opening negotiations with foreign petroleum companies. Acting in accordance with the May 1 decree demanding the return of Bolivia’s gas and oil resources to the Bolivian people, the French company Total SA met with Bolivian officials to draft a new contract for its continued presence in the country.

As part of the nationalization program, Total agreed to relinquish a majority of the shares of its Bolivian operations to the State. While Total is the first company to negotiate with Hydrocarbons Ministry representatives, Bolivian officials expect that all of the foreign companies operating within the country prior to the nationalization will do so before the November 1 deadline. Those companies that fail to meet the deadline will be required to leave Bolivia.

In addition to the successful start of negotiations, Bolivian officials were able to collect $32.3 million in new gas royalties. This increase represents the 32% difference between Bolivia’s entitlement to 50% of the proceeds of all the revenue gained from oil fields before the nationalization and the 82% required as of May 1. Foreign companies are expected to make additional payments in the coming weeks to make up for the monthly revenues earned between June and September.

These revenues are expected to total over $160 million and will be given to the national energy company, Yacimientos Petroleos Fiscales Bolivianos (YPFB), to aid in its effort to control Bolivian oil and gas production. The financially precarious position of YPFB, a principle reason for the delay in the implementation of the nationalization project, has led to speculation about its fitness to oversee domestic operations. Bolivia has the second-largest gas reserves in South America. See Boliva Nationalizes Gas Industry, May 1 2006, UICIFD Blog for additional information about the move to nationalize.