MercoPress. South Atlantic News Agency

Oil industry drastically cuts investment in Bolivia

Investment in Bolivia by the mainly foreign-owned petroleum companies dropped 40% in the first half of this year compared to the same period in 2004, reported the oil and gas industry in La Paz.

Spokesman for the Bolivian Chamber of Hydrocarbons, Carlos Alberto Lopez, told a press conference that new spending by the multinationals who pump most of the country's output of oil and much larger production of natural gas dropped from 103 million US dollars in the first six months of 2004 to 62,5 million US dollars this year.

"The most worrisome decline" happened in exploration, which fell from 45,6 million to 7,5 million US dollars, a level last seen prior to the mid-1990s privatization of the Bolivian oil and gas sector.

In 1998 when the privatization process began the industry invested 605 million US dollars. This year's dramatic fall in investment is directly linked to the Bolivia's Congress debate and approval of a new hydrocarbons bill sharply increasing royalties and taxes levied on oil and gas production as well as asserting the government's ownership of the resources "at the wellhead".

The industry alleges that the new financial burden not only ignores contracts but imposed financial burdens that threaten the "sustainability" of levels of output.

Bolivia currently produces 35 million cubic meters per day of natural gas which covers the 32.3 million cubic meters. However Bolivia has contracts to provide 30 million cubic meters daily to Brazil, 7.7 million cm to Argentina plus domestic consumption which is estimated in 4 million cubic metres per day.

Mr. Lopez said that the industry is willing to invest the amount needed to fulfil existing export contracts but not to finance a proposed pipeline project that would carry 20 million cubic meters of gas per day to northeast Argentina.

Four leading companies, Spain's Repsol YPF, British Gas, French Total-Fina-Elf and U.S. based Vintage have called on the Bolivian government for negotiations under investment protection agreements, adding that they are considering international court arbitration if the talks are non conclusive.

Bolivia's Indian majority has been clamouring for outright nationalization of the country's estimated 48 trillion cubic feet of natural gas, and controversy over how best to exploit these resources has contributed to the ousting of two presidents by street protests in the last two years.

One of the main candidates in December's early presidential election is Indian leader Evo Morales who favours a much larger role for the government in the country's key energy sector, including a possible full nationalization.