Bolivia Plans Gas Concessions for First Time Since Seizures

Bolivia plans to award oil and natural-gas exploration contracts this year in a bid to lure back foreign investments five years after President Evo Morales seized fields and refineries, the state oil company said.

Bolivia aims to grant the concessions for the first time since the seizure, with state-owned Yacimientos Petroliferos Fiscales Bolivianos, known as YPFB, as the majority partner, Chief Executive Officer Carlos Villegas said in a May 1 interview in La Paz.

Foreign oil producers are resuming spending in Bolivia after an expanded supply contract with Argentina boosted investor confidence, Villegas said. Total SA (FP), Repsol YPF SA (REP), BG Group Plc (BG/) and Petroleo Brasileiro SA (PETR4) plan to invest $3 billion in gas plants and drill 10 wells by 2014, while OAO Gazprom, Korea National Oil Corp. and YPF SA are seeking to explore in northern and eastern Bolivia, he said.

“The signing of our gas supply contract with Argentina in 2009 was the key to easing investor fears,” Villegas said. “All the companies here are investing without exception, which is sending the world an important signal.”

Oil and natural-gas output fell in the Andean nation after Morales raised taxes and rewrote contracts in 2006 to increase state control over Bolivia’s natural resources. Private investment in the industry plunged 69 percent to $271 million in 2009, the latest data available, from $865 million a decade earlier, according to YPFB.

‘Delicate moment’

Investors mulling further investments will likely need guarantees that Morales won’t change contract terms again amid pressure from unions, said Eurasia Group analyst Erasto Almeida. Morales agreed to raise workers’ salaries by 11 percent last month after labor unions staged two weeks of protests.

“Companies are going to be very cautious as this is a delicate moment,” Almeida said today in a telephone interview from New York. “There has been tension between companies and the government for a long time.”

Bolivia is seeking to boost gas output by 40 percent to 66 million cubic meters a day by 2014 to meet its supply contracts with Brazil and Argentina, said Villegas, a former energy minister. Bolivia currently exports 30 million cubic meters of gas a day to Brazil and 7.7 million cubic meters to Argentina, according to the state oil company.

Gas Contract

Bolivia agreed to almost quadruple gas supply to Argentina to 27.7 million cubic meters per day by 2026. Argentina is building a $100 million, 50-kilometer (80-mile) pipeline linking the two nations.

Repsol plans to start production at its $1.4 billion Margarita project next year, spokesman Kristian Rix said in an e-mail. Total has yet to confirm the size of reserves at its Aquio property, Total spokeswoman Phenelope Semavoine said in an April 27 telephone interview. Petrobras officials were unable to comment.

YPFB plans to more than double investment to $1.8 billion this year to boost natural-gas output, Villegas said. The company plans to finish construction of two liquefied petroleum gas plants by December 2013 and start work this year on a $1.5 billion petrochemical plant to produce polyethylene, he said.

YPFB will finance its plastics plant and a urea and ammonia project with Treasury funds and $1 billion in central bank reserves, Villegas said. The plants will seek to supply plastics to Asian markets and fertilizers to Brazil, he said.

“We’re holding talks with several companies to study the possibility of a joint venture for petrochemicals,” Villegas said. “There are markets both bordering Bolivia and overseas.”

Total fell 0.7 percent to 42.76 euros in Paris today, while Repsol dropped 1.9 percent to 23.925 euros in Madrid trading. BG slid 1.9 percent to 1,504 pence in London and Petrobras fell 0.9 percent to 25.50 reais in Sao Paulo.

To contact the reporters on this story: Alex Emery in La Paz at aemery1@bloomberg.net; Sara Shahriari in La Paz at sshahriari@bloomberg.net.

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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