On Monday, May 1, the Financial Times reported that President Evo Morales, "elected with a landslide in December on a platform of nationalizing natural resources," signed "an official nationalization decree at a ceremony at a gas field in south-eastern Bolivia operated by Petrobras, the Brazilian state-owned energy company" and ordered the Bolivian armed forces to "occupy all the energy fields in Bolivia along with battalions of engineers."[1]  --  "The decree is the latest in a series of actions that have signalled a more hostile approach to foreign investors," Hal Weiztman noted laconically.  --  AP reported that Morales "threatened to evict foreign companies unless they sign new contracts within six months giving Bolivia majority control over the entire chain of production."[2]  --  "The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources," said Moralez.  --  AP noted that the decree came on May 1, International Workers' Day.  --  Foreign energy companies that will be affected by the decree are the Brazilian company Petroleo Brasileiro (Petrobras), the Spanish company Repsol, Britain's BG Group PLC and BP PLC, U.S.-based ExxonMobil, and France's Total.  --  No news accounts reported on actual military movements at in the gas fields, and AP seemed to question whether the decree would be carried out:  "An Army spokesman did not immediately return a telephone message seeking comment on when and how the military would act."  --  Calling him "a leftist leader of coca-leaf farmers," Reuters noted that Morales had chosen Labor Day to announce the decree and hinted that he was responding to pressure from "[r]adical leftists."[3]  --  With proven reserves of 48.7 trillion cubic feet, Bolivia's natural gas fields are South America's second largest, after Venezuela, but Bolivia is "South America's poorest nation."  --  "Bolivia exports most of its natural gas to Argentina and Brazil, with whom the government is negotiating higher prices," reported Carlos Alberto Quiroga....

1.

Americas

Latin America

BOLIVIA ORDERS MILITARY TO SEIZE GAS FIELDS
By Hal Weitzman

Financial Times (UK)
May 1, 2006

http://news.ft.com/cms/s/fd4b8506-d943-11da-8b06-0000779e2340.html

Bolivia on Monday ordered its military to seize natural gas fields controlled by foreign investors as the 100-day-old government of Evo Morales signalled it was putting into effect a campaign pledge to nationalize the sector.

"We want to ask [the Armed Forces] that starting now, they occupy all the energy fields in Bolivia along with battalions of engineers," Mr. Morales said after signing an official nationalization decree at a ceremony at a gas field in south-eastern Bolivia operated by Petrobras, the Brazilian state-owned energy company. The document stated that "the state recovers ownership, possession, and total and absolute control of these resources."

It was not immediately clear which installations would be affected, but Álvaro García, vice-president, said officials from YPFB, the state energy company, and the military has already begun to take control of 53 energy installations, including gas fields, pipelines, and refineries.

Foreign investors will certainly be hit: the industry is currently dominated by international energy companies such as Petrobras, Repsol of Spain, Total of France, and BG and BP of the UK, which have collectively invested some $3.5bn in the Andean country in the past decade.

The decree is the latest in a series of actions that have signalled a more hostile approach to foreign investors. In April Mr. Morales expelled EBX, a Brazilian steelmaker, for allegedly breaking environmental law. Repsol's chief executives were imprisoned in March on oil-smuggling charges, and the government has attacked both Repsol and Total for booking Bolivian reserves as their property.

"This is another step into the recent tide towards greater state control of commodities resources, as we have seen previously in Russia and Venezuela," said Francisco Blanch, head of commodities at Merrill Lynch in London. "States are taking a larger amount of the cake and that translates into higher oil and gas prices."

Mr. Morales was elected with a landslide in December on a platform of nationalizing natural resources, but during a subsequent trip to Europe he assured foreign companies that he had no intention of expropriating assets. He had postponed an announcement on nationalization several times, saying the county lacked the technical expertise and funds.

--Additional reporting by Javier Blas in London.

2.

BOLIVIA MILITARY TOLD TO OCCUPY GAS FIELDS
By Alvaro Zuazo

** Bolivian President Evo Morales Orders Army to Immediately Occupy Natural Gas Fields **

Associated Press
May 1, 2006

[PHOTO CAPTION: In this image taken from a television screen Bolivian President Evo Morales speaks in Tarija, Bolivia, some 700 kilometers (435 miles) south of La Paz, Monday, May 1, 2006. Morales announced the nationalization of Bolivia's natural gas and oil industry, ordering foreign energy companies to send their production to a state company for sale.]

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

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," Morales said in a speech from the San Alberto petroleum field in southern Bolivia to decree a nationalization of the natural gas industry. The field has been operated by Brazil's Petroleo Brasileiro SA 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, Morales said.

An Army spokesman did not immediately return a telephone message seeking comment on when and how the military would act.

Morales, a strident leftist, had pledged to exert greater state control over the industry since he won the presidency in December in a landslide, becoming Bolivia's first Indian president.

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. Morales did not name the companies.

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 on Monday, a national holiday in Brazil.

"We are monitoring the situation very closely," said Bob Davis, a spokesman for the world's largest oil company Exxon Mobil Corp. He said Exxon Mobil has a 30 percent interest in a non-producing field called Itau, which is operated by Total.

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 privilege to operate in Bolivia if they don't sign new contracts within six months.

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. Experts have warned that the company is incapable of becoming a producer again without a massive infusion of cash.

Morales has repeatedly said the country's natural resources have been "looted" by foreign companies and must be nationalized so that Bolivians could benefit from the profits that were being sent overseas.

But he has also said 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, 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.

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

Morales also said the state would retake majority control of Bolivian hydrocarbons companies that were partially privatized in the 1990s.

Morales is following the path of Venezuela's President Hugo Chavez, his populist political mentor, said Pietro Pitts, editor-in-chief for the Venezuela-based LatinPetroleum.com.

Chavez has also moved 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 he (Morales) is going to try to do the same thing that Chavez is doing," said Pitts, referring to giving the state majority control of hydrocarbons.

Ecuador's Congress last month ratified a hydrocarbons reform law designed to cut into windfall profits of foreign crude producers, among them U.S.-based Occidental Petroleum Corp.

The law would give the government 50 percent of oil company profits whenever the international oil market exceeds the prices established in existing contracts. Most of those deals were pegged to 1990s oil prices when crude was worth a fraction of today's market.

The Ecuadorean law sparked sharp reaction from Washington. A U.S. Embassy spokeswoman said recently that the law appeared to violate a bilateral investment treaty between the two nations.

--AP Business Writers Frank Bajak and Alan Clendenning contributed to this story from Bogota, Colombia and Mexico City. AP Business Writer Brad Foss in Washington contributed to this story.

3.

Business

BOLIVIA NATIONALIZES NATGAS SECTOR, OCCUPIES FIELDS
By Carlos Alberto Quiroga

Reuters
May 1, 2006

Original source: Reuters

LA PAZ, Bolivia -- Bolivian President Evo Morales signed a decree on Monday to nationalize the hydrocarbons sector, requiring foreign-owned companies to turn over their natural gas fields to the state immediately and ordering the military to occupy them to ensure production.

Impoverished Bolivia has the second largest natural gas reserves in South America after Venezuela, and the question of how the country should manage these riches has been at the heart of several popular revolts since 2003.

Morales, a leftist leader of coca-leaf farmers, became president in January on vows to exert more state control over the country's natural resources. Radical leftists recently complained that he had made little progress on this front.

The president chose Labor Day, May 1, to announce the sector's nationalization, ordering companies to sign new operating contracts within 180 days or leave the country.

"We are not a government of mere promises, we follow through on what we propose and what the people demand," Morales said after signing the decree at the San Alberto field, operated by Brazil's state-owned Petrobras in the southeastern province of Tarija.

"We want to ask (the Armed Forces) that starting now, they occupy all the energy fields in Bolivia along with battalions of engineers," Morales said.

Bolivian Vice President Alvaro Garcia said officials from state energy company YPFB and the military began taking control of 53 energy installations -- including gas fields, pipelines, and refineries -- right after Morales signed the document.

At a Labor Day celebration crowding La Paz's main plaza, Garcia said the government's energy-related revenue will jump to $780 million next year, expanding nearly sixfold from 2002.

FROM OWNERS TO OPERATORS

Morales read aloud the government decree, saying "the state recovers ownership, possession, and total and absolute control" of hydrocarbons.

This means the state will own these resources and take charge of their commercialization, relegating foreign companies to operators. Previously, Bolivian law said the state no longer owned the gas once companies extracted it from underground.

YPFB will pay foreign companies for their services, offering about 50 percent of the value of production, although the decree indicated that companies at the country's two largest gas fields would get just 18 percent.

In the new operating contracts, Bolivia will have to give some incentives to foreign companies to keep investing. YPFB alone has no way of financing the development of gas fields.

Top investors in Bolivia's gas sector include Petrobras, Spain's Repsol YPF, UK gas and oil producer BG Group Plc, and France's Total.

Petrobras officials in Brazil could not be reached for comment on Monday, which was a holiday there as well.

Morales had promised to nationalize the gas sector even during his campaign but repeatedly said he would not expropriate foreign companies' assets.

Last year, Bolivia's Congress passed a hydrocarbons law that added a 32 percent tax on production to an already-existing 18 percent royalty. It also required that companies renegotiate their contracts with the state.

South America's poorest nation, Bolivia has natural gas reserves of some 48.7 trillion cubic feet. Foreign oil companies have invested more than $3 billion in the last decade, much of it in exploration.

Fresh investment in Bolivia has stalled due to the legal changes and political turmoil that toppled two governments in as many years. The unrest was partly driven by social groups calling for the nationalization of gas.

Bolivia exports most of its natural gas to Argentina and Brazil, with whom the government is negotiating higher prices.