MercoPress. South Atlantic News Agency

Bolivia withdraws troops from oil industry

President Evo Morales announced he is lifting the military guard deployed at energy installations and oil fields around the country since May 1, when he nationalized Bolivia's natural gas industry.

"We can't keep the soldiers at the petroleum wells," Morales said in comments Sunday. "We're going to withdraw the armed forces beginning Monday".

Morales launched his nationalization plan on May 1 and ordered troops to guard all energy installations as well as gas stations and offices of foreign companies operating in Bolivia. However the guarding of the gas stations and offices provoked criticism in Bolivia and bad feeling in the two largest energy investors in the country, Brazil's Petrobras and Spanish-Argentine Repsol YPF.

At the time Bolivian authorities said the purpose of the military guard was to protect energy installations against possible acts of sabotage from the companies affected or from celebrations by extreme nationalist groups.

As part of the nationalization, Bolivia's state energy company plans to take majority control over all energy operations in the country. The foreign companies, who allege have invested almost 6 billion US dollars since the 1990s, have 6 months to negotiate new contracts with the government or leave the country.

Apparently preliminary contacts have begun between the corporations and the Bolivian government but Petrobras and Repsol-YPF advanced that negotiations do not mean abandoning the option to appeal before international tribunals if "satisfactory" results are not reached.

Bolivia has the continent's second largest natural gas reserves after Venezuela and currently exports its gas to Brazil (30 million cubic metres per day) and Argentina (8 million cubic metres daily). Bolivian gas represents almost 80% of Sao Paulo's industrial hub demand.

Last week Bolivia agreed to the creation of a mixed hydrocarbons trade and distribution company, Petroandina with Venezuela. The agreement was signed by President Morales, visiting President Hugo Chavez and Cuba's vice president Carlos Lage.

Chavez promised to invest 1.5 billion US dollars in refining plants, petrochemicals plus exploration and drilling in central and east Bolivia, a marginal oil producing area.

Morales said during the ceremony that "this is the first time ever, Bolivia will industrialize its hydrocarbons", which are currently exported as commodities to Argentina and Brazil with no value added.

President Chavez underlined Petroandina will be involved in "exploration, exploitation and trading" but "respecting Bolivian sovereignty", and called on Peru and Ecuador to join the initiative.

Venezuela's investment in four main energy projects is similar to that undertaken by Brazil's Petrobras during the nineties, making the Brazilian company the main hydrocarbons operator in Bolivia, until now.

Bolivia's government owned oil company president Jorge Alvarado said that in the coming 18 months two plants will be built to separate ethane, propane and methane from natural gas.

Bolivia in spite of its huge gas industry does not even have a liquid gas plant to supply home cooking consumption.

A first trade deal between Bolivia and Venezuela includes bartering 200.000 barrels per month of diesel for Bolivian soybeans.