- The Washington Times - Tuesday, May 2, 2006

LA PAZ, Bolivia — President Evo Morales ordered soldiers to immediately occupy Bolivia’s natural gas fields yesterday and threatened to evict foreign companies unless they sign new contracts within six months giving Bolivia majority control over the entire chain of production.

Mr. Morales said soldiers and engineers with Bolivia’s state-owned oil company would be sent to installations operated by foreign petroleum companies.

“The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources,” Mr. Morales said in a speech from the San Alberto petroleum field in southern Bolivia to decree what he called a nationalization of the natural gas industry. The field has been operated by Brazil’s Petroleo Brasileiro SA, also called Petrobras, in association with the Spanish-Argentine Repsol YPF SA and France’s Total SA.

Bolivia has South America’s second largest natural gas reserves after Venezuela, and all foreign companies must turn over most production control to Bolivia’s cash-strapped state-owned oil company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB), Mr. Morales said.

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 YPFB, he said. Mr. Morales did not name the companies.

Mr. Morales has acknowledged that nationalization will not mean a complete state takeover, because Bolivia lacks the ability to tap all its natural gas on its own.

Last week, Mr. Morales told Brazil’s Valor Economico newspaper that Bolivia would have to “set up a new battalion, a new army of oil and gas specialists to exert the property right” for a complete state takeover of petroleum production.

Other major petroleum companies doing business in Bolivia, besides Petroleo Brasileiro and Repsol, include Britain’s BG Group PLC and BP PLC and U.S.-based Exxon Mobil Corp.

A Repsol spokesman said the company could not respond because it had not received official word of the announcement. Petrobras officials did not immediately return messages seeking comment yesterday, a national holiday in Brazil.

Mr. Morales said the government would begin negotiations immediately with the companies to make sure they are willing to comply, but said they could be stripped of their rights to operate in Bolivia if they don’t sign new contracts within the six-month deadline.

In the past, YPFB produced Bolivia’s natural gas, but it was reduced to an administrative role in the mid-1990s after the country’s gas exploration and production business was privatized. Analysts have warned that the company is incapable of becoming a producer again without a massive infusion of cash.

Mr. Morales, a strident leftist, won a presidential election late last year after saying the country’s natural resources had been “looted” by foreign companies and must be nationalized so that Bolivians could benefit from the profits that were being sent overseas.

Mr. Morales chose May 1, International Day of the Workers, to announce the nationalization plan. He wore a YPFB helmet as he gave his speech. Afterward, a soldier unfurled a Bolivian flag from atop the natural gas installation.

Mr. Morales also said the state would retake control of Bolivian hydrocarbon companies that were partially privatized in the 1990s, with the state taking a majority stake.

With the nationalization announcement, Mr. Morales is following the path of Venezuelan President Hugo Chavez, his populist political mentor, said Pietro Pitts, editor in chief for the Venezuela-based LatinPetroleum.com.

Mr. Chavez has also made moves to exert greater control over his country’s vast petroleum reserves. Most foreign companies have decided to keep producing in Venezuela, though some announced they would abandon some production.

“You can call Bolivia Venezuela Part II because it seems like [Mr. Morales] is going to try to do the same thing that Chavez is doing,” said Mr. Pitts, namely giving the state majority control in its fossil fuel wealth.

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