Oct. 31 (Bloomberg) -- Petroleo Brasileiro SA, Brazil's state- controlled oil company, faced down Bolivian President Evo Morales' threats of nationalization, averting the seizure of assets by agreeing to pay a royalty in a new 30-year production contract.

Morales declared victory in the standoff with his country's biggest natural gas producer, saying he persuaded the Brazilian company to pay the government a 50 percent royalty plus a floating- rate tax on gas produced. Petrobras said the total payment probably will be lower than the 82 percent ordered by Morales this year.

``Considering it was worse before, this is an advancement,'' said Regis Abreu, who helps manage 1.1 billion reais ($513 million) of assets at Mercatta Gestao de Recursos in Rio de Janeiro, including Petrobras shares. ``It will not hurt Petrobras financially.''

The agreement ends months of negotiations between Morales' administration and foreign energy companies in Bolivia, where the former leader of coca growers has pledged to spread more of the nation's energy wealth to citizens. Last weekend, the government signed 10 agreements with oil companies that have interests in Bolivia, mostly for exploration only.

Morales on Nov. 13 will send the new contracts to Congress, which then will consider them for approval, the country's state information agency ABI said today on its Web site.

``This guarantees our presence in Bolivia,'' Chief Executive Officer Sergio Gabrielli told reporters today at the company's headquarters in Rio. ``Under this contract there is no loss for us. It guarantees our investment and our return.''

Petrobras will be guaranteed a return of 15 percent of the life of the contract, Gabrielli said. The company won't invest any more money in Bolivia beyond projects it has committed to and maintenance, he said.

Morales said he was ready to use the Armed Forces to evict foreign companies from their property if they didn't sign the contracts, ABI reported.

`Year of Investment'

``Next year will be a year of investment,'' Morales was quoted by the service as saying today. ``Hopefully we can accelerate so in less than two years we can fulfill our international supply agreements with Brazil and Argentina.''

Brazil receives over half of its gas needs, and about four- fifths of all gas consumed by Sao Paulo's industrial belt, from Bolivia.

``Brazil is very dependent on natural gas from Bolivia so the agreement was positive,'' Elaine Rabelo, an analyst at Sao Paulo brokerage Coinvalores CCVM Ltda. said.

Petrobras's shares rose 1.2 percent, or 51 centavos, to 43.11 reais.

30 Years

Bolivia's state oil company, YPF Bolivianos, will own any new equipment that Petrobras installs at the two gas fields and will become the owner of the assets after 30 years, Petrobras said in a statement. Bolivia will get about 80 percent of its gas revenue from its agreement with Petrobras, down from about 95 percent now, Gabrielli said.

Still unresolved is the issue of gas prices. Bolivian government officials will meet with their Brazilian counterparts in Rio de Janeiro on Nov. 10 to discuss an increase in natural gas prices, according to Brazil Energy and Mines Minister Silas Rondeau.

Petrobras is the only oil refiner in Bolivia and provides all of Bolivia's gasoline and aviation fuel and 70 percent of its diesel oil. Petrobras also owns the San Alberto and San Antonio gas fields along with Repsol-YPF SA and Total SA, which provide of 70 percent of Bolivia's natural gas.

Petrobras doesn't plan to raise any new money through issuance of bonds until 2008, Chief Financial Officer Almir Barbassa said. Petrobras may swap debt for longer-term, lower rate bonds, he said.

To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net Matthew Craze in Buenos Aires at mcraze@bloomberg.net

Last Updated: October 31, 2006 17:34 EST