By Franz Chávez
Almost six years after the nationalization of hydrocarbon resources in Bolivia, foreign companies maintain an active presence in the sector, and the government is now offering them greater incentives to increase oil production.
During the same week that President Cristina Fernández de Kirchner of Argentina announced the expropriation of 51 percent of shares in the oil company YPF, previously held by the Spanish corporation Repsol, the Bolivian government issued a decree that raised incentives for crude oil production from 10 dollars to 40 dollars a barrel.
Supreme Decree 1202 establishes that the Bolivian national treasury will issue tax credit notes in the amount of 30 dollars.
For each barrel (159 liters) of crude they produce, foreign oil companies will continue to receive 10 dollars in cash in addition to a credit note that can be used for tax payments.
In a statement released by the state-owned oil company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) on Apr. 19, company president Carlos Villegas stated that the reason for the allocation of this additional incentive was that “operators have not made significant investments to find larger reserves of oil.”
Researcher Carlos Arze of the Center for Research on Labor and Agrarian Development explained that the contracts signed between foreign companies and the Bolivian government following the 2006 nationalization did not include clauses obliging the companies to replenish reserves.
On May 1, 2006, leftist President Evo Morales announced the nationalization of Bolivia’s hydrocarbon reserves. In October of that year, new contracts were signed with the oil and gas companies operating in the country – most of which were foreign-owned – and endorsed by the Bolivian Congress.
Six years later, these companies are earning 824 million dollars in profits, “and not a single one has pulled out of Bolivia,” Arze told Tierramérica. He recalled the comments of a Brazilian businessman who concluded at the time that his operations in Bolivia would be even more secure, since they now had congressional backing.
“If this was an anti-imperialist nationalization, why didn’t they leave?” asked Arze.
In 2004, the oil and natural gas industry in Bolivia was worth 1.172 billion dollars. The companies operating in the sector took 71 percent of the profits (832 million dollars), according to Arze.
The new contracts changed the equation. Now, private operators receive 27 percent of revenues, while the state keeps 73 percent through various taxes, shares and royalties, he noted. But in absolute terms, the amounts earned by the companies have changed very little.
In 2010, the sector generated 3.053 billion dollars, of which the oil and gas companies received 824 million dollars. If you add the incentives for oil production, estimated at six million dollars annually, the total is 830 million, just two million dollars less than they earned before the rules of the game were changed, noted Arze.
According to YPFB, between 2001 and 2005, the state took in 332 million dollars annually in oil and gas revenues.
After nationalization, these revenues rose to a yearly average of 2.07 billion dollars. Over the last six years, the state has earned 12.424 billion dollars from oil and gas operations.
Gas production has risen from 40.4 million cubic meters daily in 2005 to 45.06 million cubic meters in 2011.
But oil production has fallen. In 2005, Bolivia produced 50,035 barrels of oil a day, but in 2011, output had dropped to 41,147 barrels.
As of June 2011, 15 foreign companies, headed up by Petrobras of Brazil, had signed contracts with Bolivia for oil and gas exploration and extraction activities, for terms of between six and 28 years, according to figures from YPFB.
Political economy professor Julio Alvarado told Tierramérica that Bolivia’s current oil policy is aimed at encouraging foreign companies to continue operating in the country’s most productive fields.
Alvarado noted that the nationalization decree ordered an audit of the transnational companies, but the final reports were not made public. This protection of corporate data is a demonstration of a policy favorable to foreign investors, he said.
In the meantime, Bolivia has become increasingly dependent on fuel imports for domestic consumption. In 2010, imports totaled 600 million dollars, in 2011 they had risen to 900 million, and this year they are expected to reach 1.2 billion dollars, according to Alvarado’s figures.
In 2010, Spanish oil and gas company Repsol was the foreign company with the second largest share in production in Bolivia, with 8.7 percent, far behind Petrobras, which accounts for 63 percent.
In the oil sector, Repsol has operations in a quarter of the country’s blocks and fields and accounts for five percent of exploration activities.
During the nationalization process, the Bolivian state’s forced purchase of 1.1 percent of the Spanish share in the Andina company was compensated with a payment of 6.2 million dollars in 2007.
In contrast, the nationalization of the shares held by U.S.-based Amoco in the Bolivian company Chaco resulted in the filing of a lawsuit against the Bolivian state for 233 million dollars, said Arze.
Repsol is in charge of production at the Margarita gas field in the southern department of Tarija, which holds some two trillion cubic feet of gas and is the source of the eight million cubic meters of gas per day supplied to Argentina – an amount equivalent to the daily consumption in Bolivia.
In March 2010, Bolivia pledged to increase gas exports to Argentina to up to 20 million cubic meters daily by 2017.
The source of this gas is the Margarita-Huacaya field, operated by different companies. Repsol is present as part of the joint venture Repsol YPF E&P Bolivia SA, which has a 37.5 percent stake in the field.
Arze believes it will be a profitable business for Repsol, since it will benefit from the prices paid by Argentina, roughly 11 dollars per million British thermal units (BTU) in the first quarter of 2012.
Brazil, which imports three times the daily consumption in Bolivia, pays nine dollars per million BTU.