MercoPress. South Atlantic News Agency

Bolivian oil conflict: Petrobras cuts investments

Brazilian government Oil Company Petrobras which operates in Bolivia and is responsible for 20% of the country's GDP announced it will drastically reduce investments because of the latest controversial hydrocarbons bill.

"Petrobras is not interested in leaving Bolivia but we will now scale down and cut down several of our projects", announced Wednesday Brazilian Mines and Energy minister Dilam Roussef in an interview with the Brazilian agency Folha.

Ms. Roussef said Petrobras will make a detailed analysis of its investment plans in Bolivia as to have an "exact notion" of the true impact of the new hydrocarbons bill approved this week by the Bolivian Congress.

The new and controversial legislation which Bolivian president Carlos Mesa refused to enact leaving it to the Legislative branch significantly increases taxes on foreign oil corporations, gives a greater participation to the Bolivian government in the industry and replaces the 1996 bill which opened the way for foreign investment in oil and gas exploration and exploitation in the country.

Petrobras has been in Bolivia since 1996 and has invested 1,6 billion US dollars. Besides Brazil is Bolivia's main natural gas client and some analysts believe the Brazilian government expects a preferential treatment from the Bolivian government.

Brazil consumes 37 million cubic metres of gas, 25 million of which come from neighboring Bolivia.

Petrobras is also disappointed with other aspects of the new bill which increases taxes, royalties, and transfer some of the gas fields to the Bolivian government owned oil company.

The Bolivian Hydrocarbons Chamber in an official release described the conditions in the new bill as "confiscatory" affecting "contract rights, the Bolivian Constitution, legal system and international agreements". Oil royalties jump from 18 to 50% with a direct 32% tax on production and forces the redrafting of contracts in line with the new bill.

The hydrocarbons chamber members are besides Petrobras, British Gas, British Petroleum and French Total.

The new legislation will have a negative impact on "future investments and development of the industry in circumstances when the country most needs them", underlines the Chamber's release. However each company will act accordingly, "in the framework of the rule of the law to ensure and protect its rights".