EU warns Bolivia on nationalizing natural gas

Immediately after Morales spoke, about 100 soldiers took control of the Palmasola refinery in the eastern city of Santa Cruz. Most stood before the gates of the refinery, which is run by Brazil’s Petroleo Brasileiro SA, or Petrobras.

Brazil is Bolivia’s biggest natural-gas client, followed by Argentina, and Brazil’s demand has been rising rapidly due to power generation, cooking and automotive needs.

Petrobras President Sergio Gabrielli said officials were seeking “to secure our rights” to Bolivian gas and the $1.6 billion Petrobras has invested in Bolivia since the mid-1990s. He called the decree by Morales “a unilateral measure adopted in an unfriendly way.”

Speaking before thousands of supporters at the presidential palace, Morales thanked the armed forces for supporting his decree and said “foreign petroleum companies that announced they will freeze their investments can leave.”

Foreign companies extracting and exporting Bolivia’s gas have invested about $3.5 billion over the last decade.

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

The European Commission said it also would study the impact on Bolivia’s economy and on foreign investors there. Besides Petrobras, most of the biggest natural gas players are European. They include Britain’s BG Group PLC and BP PLC, Petrobras, Spanish-Argentine Repsol YPF SA, France’s Total SA and U.S.-based Exxon Mobil Corp.

Repsol shares fell 2 percent to $29.29 in Madrid on Tuesday, but the news did not affect shares of the other companies. Analysts say Repsol’s rights to gas in Bolivia represent about a third of the company’s total oil and gas reserves, a much larger percentage than the other companies’ reserves.

Multinational companies that produced 100 million cubic feet of natural gas daily last year in Bolivia will be able to retain only 18 percent of their production, with the rest being given to the Bolivian state-owned company.

In Madrid, Spain’s government expressed “deep concern” about the decree to nationalize the sector.

“The government hopes that in the 180 days period announced by the Bolivian president for foreign companies to regularize their current contracts, there is authentic negotiation and dialogue between the government and the different companies in which each other’s interests are respected,” Spain’s Foreign Ministry said Monday.

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

In the past, YPFB produced Bolivia’s natural gas, but it was reduced to an administrative role in the mid-1990s after the industry was privatized.

Some industry experts expressed serious doubts about Bolivia’s ability to run the gas fields.

“They have no technicians; no trained people,” said Andres Stepkowski, a petroleum consultant in Santa Cruz.

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