Refineries under guard as president nationalises gas sector

Soldiers guarded natural gas fields and refineries across Bolivia today after President Evo Morales ordered the sector nationalised, threatening to evict foreign companies unless they handed over production control within six months.

Morales’ announcement yesterday fulfilled an election promise, reconquering ownership of Bolivia’s natural resources, which he said was “a fundamental means for recovering our sovereignty”.

The bold stroke solidifies Morales’ role along with Venezuela’s Hugo Chavez and Cuba’s Fidel Castro in Latin America’s new axis of populist leaders opposed to US and corporate influence in the region.

About 100 soldiers peacefully took control of the Palmasola refinery in the eastern city of Santa Cruz, some carrying sub-machine guns, others anti-riot gear. Most stood in front of the gates of the refinery, which is run by Brazil’s Petroleo Brasileiro SA, or Petrobras.

“Our mission is to guarantee the normal operations” of the refinery, said unit commander Captain Jorge Lenz.

The government said soldiers and engineers were sent to 56 locations around the country – including gas fields tapped by foreign companies – including Britain’s BG Group and BP, Petrobras, Spanish-Argentine Repsol, France’s Total and US-based Exxon Mobil.

The companies have six months to agree to new contracts or leave Bolivia.

“The looting by the foreign companies has ended,” Morales, Bolivia’s first Indian president, said in a speech at the San Alberto field, in the southern state of Tajira, which Petrobras operates in association with Repsol and Total.

Speaking later to thousands of supporters at the presidential palace in La Paz, Morales thanked the military for its support and said “foreign petroleum companies that announced they will freeze their investments can leave”.

Morales added that the nationalisation of the hydrocarbons sector “was just the beginning, because tomorrow it will be the mines, the forest resources and the land”.

Foreign companies extracting and exporting Bolivia’s gas have invested about €2.9bn over the last decade and Petrobras alone has pumped €1.3bn into the nation to feed ever-increasing demand in Brazil.

But new investments have been largely frozen since last year over concerns about what Morales’ nationalisation plan would mean for producers.

The announcement follows a trend by oil and gas-rich Latin American nations to exact a larger share of profits from extraction of the fossil fuels.

It comes as Ecuador argues with Washington over a new oil royalties law and less than a month after Chavez ordered the seizure of oil fields from Total and Italy’s Eni when the companies failed to comply with a government demand that operations be turned over to Venezuela’s state oil company, Petroleos de Venezuela.

Morales is following the path of Chavez, his political mentor, says Pietro Pitts, editor-in-chief of the Venezuela-based LatinPetroleum.com.

“You can call Bolivia Venezuela Part II because it seems like he (Morales) is going to try to do the same thing that Chavez is doing,” said Pitts.

Bolivia has South America’s second-largest natural gas reserves after Venezuela.

Until new contracts are reached, companies running gas fields that produced 100 million cubic feet of natural gas daily last year will be able to keep only 18% of their production, says Morales.

Bolivia’s cash-strapped state-owned oil company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB), will get the rest.

“We are monitoring the situation very closely,” said Bob Davis, a spokesman for the world’s largest oil company, Exxon Mobil, which has a 30% interest in a non-producing field called Itau that is operated by Total.

In Madrid, Spain’s government expressed “deep concern” about the decree to nationalise the hydrocarbons sector, expressing hope “there is authentic negotiation and dialogue between the government and the different companies in which each other’s interests are respected”.

Petrobras called the Morales’ decree an “unfriendly” action that took the company by surprise.

Landlocked Bolivia must sell to its neighbours because it lacks a pipeline to ship gas to the Pacific Ocean and from there to Asia, Mexico or the US.

YPFB produced Bolivia’s natural gas until the mid-1990s, when it was reduced to an administrative role after the country’s gas exploration and production business was privatised.

Experts have warned that the company is incapable of becoming a producer again without a massive infusion of cash and Morales has said that nationalisation will not mean a complete state takeover because Bolivia lacks the ability to tap all its natural gas on its own.