MercoPress. South Atlantic News Agency

Oil corporations and Bolivia agree on investment program

Bolivia has S.A. second-biggest natural gas reserves

Bolivia announced this week foreign energy corporations have promised to invest more than 580 million US dollars in 2007, about three times more than last year. The announcement comes a month after President Evo Morales threatened the industry with ignoring contracts if they were not committed to investing in Bolivia.

Energy Minister Carlos Villegas said more than two thirds of that investment had been pledged by the local units of Spain's Repsol YPF, Brazil's government managed Petrobras and Pan American Energy. Villegas attributed the investment rebound to the energy nationalization policy declared by President Evo Morales in May last year. "The nationalization guarantees the rule of law to oil companies operating in Bolivia" Villegas told a news conference in La Paz in his first detailed comments about the companies' investment commitments. After a long, hard "negotiation process" the oil corporations agreed with the Bolivian government to 254 million US dollars in capital investment and 334 million in operational and management costs revealed Villegas. "All capital investment projects will have to be approved by Bolivia's government hydrocarbons corporation, YPFB. With these numbers we're reaching almost 2003 level, when investments begun declining in the industry mainly because of the country's political instability. Villegas said Repsol, partly through its local subsidiary Andina, would invest 156 million US dollars this year, while Chaco, controlled by Pan American Energy, plans an investment of 147.4 million US dollars. Petrobras, through its two Bolivian-based companies, has an investment plan worth 128 million; Britain's BG Group Plc has plans to spend 52 million and French oil major Total 14 million US dollars. According to the Bolivian Hydrocarbons Chamber foreign energy investment in Bolivia, which has South America's second-biggest natural gas reserves (behind Venezuela) peaked at 600 million US dollars in 1998 and declined steadily to 197 million in 2006. Villegas said he expected a "very significant jump" in energy sector investment next year when works start on a project to almost quadruple Bolivian gas exports to neighboring Argentina. Brazil and Argentina are Bolivia's main clients for natural gas with Petrobras (47%) and Repsol-YPF (27%) holding control of most of the business.