Indians cheer nationalisation, but oil firms reassess plans

PUBLISHED : Friday, 05 May, 2006, 12:00am
UPDATED : Friday, 05 May, 2006, 12:00am

Oil companies in Bolivia reassessed their investment plans as regional leaders prepared for an emergency summit to discuss President Evo Morales' nationalisation of the energy industry.

In the poor city of El Alto, indigenous healers offered up coca leaves in traditional ceremonies to cheer Mr Morales for seizing control of oil- and gas fields from foreign companies, signalling the strong domestic support for his decision.

But the leftist's action alarmed investors and worried Bolivia's neighbours - its biggest customers - and European allies, whose companies operate in Bolivia.

Brazil is the largest investor in Bolivian energy through state oil company Petrobras, with US$1.5 billion in investments.

Brazilian President Luiz Ignacio 'Lula' da Silva played down any diplomatic friction between the two countries over Mr Morales' decision. 'There is no crisis between Bolivia and Brazil, and there will be no crisis,' he said. 'Our differences will be resolved around a negotiating table.'

But Petrobras chief executive Jose Sergio Gabrielli said the company was scrapping plans to expand a natural-gas pipeline from the Andean country. The project would have increased capacity by 50 per cent from the current 30 million cubic metres per day.

Spain's government said it would send a delegation to La Paz to discuss the nationalisation policy, which also calls for higher taxes and caps company revenues.

Mr Morales has given foreign firms 180 days to sign new contracts with his government.

The nationalisation is an 'isolated problem' that requires 'diplomatic and political efforts', Spanish Prime Minister Jose Luis Rodriguez Zapatero said. Spain's Repsol is a leading player in Bolivia.

Yesterday Mr Morales was expected to meet Mr da Silva, Argentinian President Nestor Kirchner and Venezuelan President Hugo Chavez in the Argentine city of Puerto Iguazu to discuss the impact of the new energy rules.

Argentina is the second biggest market for Bolivian gas.

Mr Chavez - who enacted similar measures to rewrite contracts and impose retroactive tax rises in Venezuela, the world's fifth-largest oil exporter - arrived in La Paz late on Wednesday.

After being greeted by Mr Morales, a beaming Mr Chavez congratulated him on the nationalisation, saying: 'The voice of the people is the voice of God.'

Mr Chavez and Mr Morales emerged from a three-hour meeting to announce a 'strategic alliance' between Bolivia's state-owned YPFB and Venezuela's state petroleum company PDVSA to develop gas industrialisation projects, a partnership to be formalised later this month.

'Some companies have said they will not invest any more and they have the right to not invest. We have many offers for investment and calls from interested companies,' Mr Morales said.

When asked whether Venezuela would help YPFB operate Bolivia's natural gas fields in the short term, Mr Chavez said PDVSA was 'at their service'.