MercoPress. South Atlantic News Agency

Bolivia's second attempt to nationalize oil and gas

Bolivian Vice President Alvaro Garcia Linera warned oil companies that time is running out for agreeing new contracts in compliance with the country's nationalization of the hydrocarbons industry.

Garcia Linera said at a press conference that the government was aware of some companies alleged attitude of stalling the process but insisted that come October 31, if no agreements are signed, Bolivia's government managed oil company YPFB was ready to take over oil and natural gas assets.

"We told them in a very firm and respectful way: the timetable is not going to be changed, if by October 28 they have not concluded ... contracts that benefit the firm and the country, we will proceed as set forth in the nationalization decree" he said.

In the May 1 decree, Socialist President Evo Morales gave foreign energy companies doing business in Bolivia six months to accept minority shares in partnerships with YPFB. Firms unable or unwilling to accept that condition face having to abandon their operations in Bolivia and then negotiate with La Paz compensations.

The government will not change "either the dates or the basis and basic philosophy of the total and absolute recovery of the hydrocarbon (production) chain" Garcia Linera emphasized warning companies they will gain nothing "from a strategy of delay".

However Garcia Linera said the Bolivian government's offer was "flexible, tolerant and ready to change certain issues" like details of the model framework for the new operations contracts.

Garcia Linera's statements coincided with the second day of negotiations between Bolivian officials and Spain's Repsol YPF. Both sides said they were confident an agreement would be reached before the end of October.

But the most difficult negotiations to date have been with the Brazil's government owned energy giant Petrobras, the firm most affected by the nationalization, and which has soured bilateral relations between both countries.

Apparently negotiations between Petrobras and Bolivian officials are scheduled to resume in the "coming days" and Brazil's Energy Minister Silas Rondeau is expected in La Paz early October.

Actually Rondeau's visit earlier this month was cancelled at last moment to protest a decree authorizing YPFB to take complete control of domestic sales of crude oil, refined products and derivatives which meant a death blow for Petrobras most lucrative business in Bolivia where it operates the country's main refineries.

Brazil's reaction was immediate and president Luiz Inacio Lula da Silva described the action as "unilateral" and threatened with "harsher measures".

Finally the decree was suspended, the Bolivian Energy minister sacked and Petrobras was invited to return to the negotiation table.

Natural gas exports from Bolivia to Argentina and Brazil are the country's main source of foreign income and are under the control of mainly Petrobras.