Latin America: Bolivia's gas nationalisation stalls; Brazil's gas-spending surges
WHEN Bolivian President Evo Morales sent troops to occupy oil and gas fields and decreed a nationalisation of his country's energy industry on 1 May, the plan was to re-found YPFB, the state-owned oil company, and place it in firm control of everything from refining, fuels distribution and gas prices to pipelines and, eventually, exploration and production. The decree said foreign majors would have to sign new contracts with the government by 1 November and hand over majority control of their Bolivian energy assets.
Part of Bolivia's plans have now been delayed and the government admits YPFB has neither the cash nor the expertise to take on the full breadth of its new role in the immediate future. On 11 August, the government said some aspects of its nationalisation would be "suspended". YPFB said that to fulfil its new role it would need a cash infusion of some $180m. Bolivia's Central Bank has so far refused to advance YPFB the funding and the central government is in a tug-of-war with regional governments for oil and gas royalty income that could be used to fund YPFB's expansion.
So far, Bolivia's government has not begun talks with majors on the terms of new contracts, despite earlier threatening to expel foreign oil companies that refused to agree to government terms by 1 November. Now, officials say a November date to complete the renegotiation process may be unrealistic.
The government has failed to complete negotiations on how it will raise its stakes in downstream assets, such as the country's two Petrobras-controlled refineries or a Shell-led pipelines network known as Transredes. While the government now controls shares in these firms that had been held by Bolivian pension funds, foreign majors still control a majority of shares, and have demanded compensation for them, which YPFB does not yet have means to provide.
That Bolivia's YPFB is having trouble meeting Morales' objectives is hardly a surprise. Since the late 1990s, when Bolivia privatised its oil and gas sector, YPFB has lost its technicians and engineers, assuming the role of bookkeeper for the government's take of proceeds from foreign companies' activities.
In addition, by delaying its take over of the country's downstream sector, including fuels retailing, YPFB is more likely to be able to assuage the anger of motorists, who are suffering from fuel shortages. For now, many Bolivians tend to blame Petrobras, the largest refiner, or the country's private-sector fuels retailers. But when YPFB takes over, the heat would shift to the government.
However, although its nationalisation programme is facing setbacks, the government has given no indication that it intends to change its plans by offering more lenient terms to foreign investors. Bolivia's near-term strategy appears to be to delay the capital-intensive and technically difficult aspects of nationalisation, while raking in cash from higher natural gas prices and the increased royalty/tax burden on production, which rose to 82% in the country's largest gasfields, operated by Petrobras and Repsol YPF.
In May, Bolivian officials forecast the treasury would gain an extra $300m a year as a result of the royalty increases on those large fields alone. In July, Argentina agreed to pay 47% more for around 6m cubic metres a day (cm/d) of Bolivian gas imports until the end of the year, after which the price may rise again. In addition, Argentina recently said it will build a 20m cm/d pipeline that will quadruple Bolivia's gas export capacity to its southern neighbour, to around 27.7m cm/d.
However, Brazil, which is by far Bolivia's largest gas client, has so far rejected any sharp price increase for gas supplies and has cancelled plans to expand pipeline capacity between the countries from the existing 30m cm/d. Petrobras' reaction to Bolivia's nationalisation has been to announce huge boosts in spending to develop Brazil's own natural gas reserves, as well as plans to import liquefied natural gas, starting in early 2009, instead of seeking more gas from Bolivia. Petrobras says it will spend, with joint venture partners, more than $22bn to increase supplies of gas to Brazil's market by 2011.
Although Petrobras has already told Brazilian consumers they should prepare to pay more for gas as the country weans itself off traditionally cheap Bolivian supplies, there are signs that Brazil's shift in strategy could pay off. Petrobras' gas director, Ildo Sauer, said last month that the state-controlled firm believes Brazil holds perhaps triple the gas reserves it has on its books – between 0.82 trillion cm and 1 trillion cm, compared with the 320bn cm in proved reserves declared at present.
comments powered by Disqus.