Bolivia Military Told to Occupy Gas Fields

 
AP Photo: In this image taken from a television screen Bolivian President Evo Morales speaks in Tarija, Bolivia, some 700 kilometers (435 miles) south of La Paz, Monday, May 1, 2006.
Monday May 1, 5:31 pm ET
By Alvaro Zuazo, Associated Press Writer Bolivian President Evo Morales Orders Army to Immediately Occupy Natural Gas Fields

LA PAZ, Bolivia (AP) -- President Evo Morales ordered soldiers to occupy Bolivia's natural gas fields Monday and threatened to evict foreign companies unless they give Bolivia control over the entire chain of production.

 

Morales said soldiers and engineers with Bolivia's state-owned oil company would be sent "immediately" to installations and gas fields tapped by foreign petroleum companies -- including Britain's BG Group PLC and BP PLC, Brazil's Petroleo Brasileiro SA, Spanish-Argentine Repsol YPF SA and U.S.-based Exxon Mobil Corp.

Morales, a leftist allied with Cuba's Fidel Castro and Venezuela's Hugo Chavez in seeking to blunt U.S. and outside influence in the region, had pledged to exert greater state control over the industry since he won the presidency in December, becoming Bolivia's first Indian president.

The companies have six months to agree to new contracts, or must leave Bolivia, he said.

"The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources," Morales said in a speech from the San Alberto petroleum field in southern Bolivia operated by Brazil's Petroleo Brasileiro SA in association with the Spanish-Argentine Repsol YPF SA and Total.

"The looting by the foreign companies has ended," Morales declared.

The announcement came less than a month after Chavez ordered the seizure of oil fields from Total and Italy's Eni SpA when the companies failed to comply with a government demand that operations be turned over to Venezuela's state oil company, Petroleos de Venezuela SA.

Bolivia has South America's second largest natural gas reserves after Venezuela, and all foreign companies must turn over most production control to Bolivia's cash-strapped state-owned oil company, Yacimientos Petroliferos Fiscales Bolivianos, Morales said.

An Army spokesman did not immediately return a telephone message seeking comment on when and how the military would act.

Multinational companies that produced 100 million cubic feet of natural gas daily last year in Bolivia will be able to retain only 18 percent of their production, with the rest being given to YPFB, he said. Morales did not name the companies.

A Repsol spokesman said the company could not respond because it had not received official word of the announcement. Petrobras officials did not immediately return messages seeking comment on Monday, a national holiday in Brazil.

"We are monitoring the situation very closely," said Bob Davis, a spokesman for the world's largest oil company Exxon Mobil Corp. He said Exxon Mobil has a 30 percent interest in a non-producing field called Itau, which is operated by Total.

Morales said the government would begin negotiations immediately with the companies to make sure they are willing to comply, but said they could be stripped of their privilege to operate in Bolivia if they don't sign new contracts within six months.

In the past, YPFB produced Bolivia's natural gas, but it was reduced to an administrative role in the mid-1990s after the country's gas exploration and production business was privatized. Experts have warned that the company is incapable of becoming a producer again without a massive infusion of cash.

Morales has repeatedly said the country's natural resources have been "looted" by foreign companies and must be nationalized so that Bolivians could benefit from the profits that were being sent overseas.

But he has also said that nationalization will not mean a complete state takeover, because Bolivia lacks the ability to tap all its natural gas on its own.

Last week, Morales told Brazil's Valor Economico newspaper that Bolivia would have to "set up a new battalion, a new army of oil and gas specialists to exert the property right" for a complete state takeover of petroleum production.

Morales chose May 1, International Day of the Workers, to announce the nationalization plan. He wore a YPFB helmet as he gave his speech. Afterward, a soldier unfurled a Bolivian flag from atop the natural gas installation.

Morales also said the state would retake majority control of Bolivian hydrocarbons companies that were partially privatized in the 1990s.

Morales is following the path of Chavez, his populist political mentor, said Pietro Pitts, editor-in-chief for the Venezuela-based LatinPetroleum.com.

"You can call Bolivia Venezuela Part II because it seems like he (Morales) is going to try to do the same thing that Chavez is doing," said Pitts, referring to giving the state majority control of hydrocarbons.

Ecuador's Congress last month ratified a hydrocarbons reform law designed to cut into windfall profits of foreign crude producers, among them U.S.-based Occidental Petroleum Corp.

The law would give the government 50 percent of oil company profits whenever the international oil market exceeds the prices established in existing contracts. Most of those deals were pegged to 1990s oil prices when crude was worth a fraction of today's market.

The Ecuadorean law sparked sharp reaction from Washington. A U.S. Embassy spokeswoman said recently that the law appeared to violate a bilateral investment treaty between the two nations.

AP Business Writers Frank Bajak and Alan Clendenning contributed to this story from Bogota, Colombia and Mexico City