MercoPress. South Atlantic News Agency

Brazil and Bolivia make progress

Brazilian Energy Minister Silas Rondeau said yesterday there has been progress in talks with Bolivia on new contracts for state energy company Petrobras to comply with Bolivia's gas sector nationalization.

His Bolivian counterpart, Carlos Villegas, said on Friday Bolivia was sticking to its October 28 deadline to sign new operating contracts with foreign energy companies working in the country and that a failure to sign such contracts would mean their operations will be taken over by state oil company YPFB.

"There have been signs of advances towards an agreement before October 28," Rondeau told reporters.

Bolivia, which has South America's largest natural gas reserves after Venezuela, nationalized the energy industry in May and set the deadline for contracts to be renegotiated in line with the nationalization decree.

A Brazilian energy ministry spokesman said Rondeau spoke to Villegas several times yesterday to check on the talks conducted in La Paz by Brazilian officials from the energy and foreign ministries, as well as Petrobras SA.

"The talks are heading towards an accord,' the spokesman said, adding that Rondeau would travel to La Paz to sign an eventual deal.

Villegas, who took the helm of the Energy Ministry last month when the former minister quit, said last week Rondeau could visit Bolivia in the coming days.

The new contracts seek to give the government greater control over oil and natural gas production and a larger share of profits. Under the nationalization, the companies will be forced to leave unless they sign new contracts.

With days to go before the deadline, contracts have still not been signed with major investors Petrobras and Spain's Repsol YPF. Other big operators include French oil major Total and Britain's BG Group Plc.

Brazilian President Luiz Inácio Lula da Silva, who will seek re-election in a run-off vote on Sunday, has been criticized by the opposition for taking a soft line with Bolivia and not defending Brazilian interests there.

The head of Lula's Workers' Party and Lula campaign chief, Marco Aurelio García, threatened yesterday that if no acceptable deal is reached, Petrobras will leave Bolivia altogether and seek compensation in international courts.

But he also said that negotiations were still going on and the government was awaiting the results of the talks.

Brazil imports about half of its natural gas from Bolivia. It is also holding talks with Bolivia on natural gas prices, which the neighbouring country wants to hike.