Latin America demands more for its oil and gas
Gas-rich countries like Bolivia are rolling out plans to nationalize energy reserves.
from the April 10, 2007 edition
Page 2 of 4
'Nationalizing' Bolivia's gas fields
Almost a year ago, on May 1, Morales carried out his campaign promise to nationalize the gas fields that provide Brazil half its daily consumption. But in many ways, nationalization is a misnomer. Unlike expropriations of the past, none of the foreign companies, such as Brazil's state-owned Petrobras or Spain's Repsol YPF, were kicked out.
Instead, Morales gave companies six months to accept new contracts that raise the state's take – and raised taxes on the two most productive fields by 32 percent for six months. It also gave the former state energy company, YPFB, a majority stake in the industry, with control over prices and commercial sales.
The move was wildly popular. In 2004, 92 percent of Bolivians supported a stronger state role in gas exploration and production in a referendum. Morales estimates that they will reap $1.5 billion in additional revenue in 2007.
While Morales, the first to be elected among the wave of leftists as front-runners across Latin America in the past two years, has taken the most sudden steps toward "nationalization," he is not alone.
Last spring, Ecuador's state oil company seized an oil field operated by the American Occidental Petroleum Corp., and passed a law that raises tariffs on private firms when oil prices increase. Analysts say it is unclear what Rafael Correa, Ecuador's new leftist leader who campaigned on pledges to reap more from foreign companies, will do in terms of contract negotiation. "He wants Ecuador to get its fair share, but there is uncertainty about how far he will go," says Jed Bailey, director of research for Latin America at Cambridge Energy Research Associates (CERA) in Massachusetts.
Even in Peru, one of the US's closest free-trade allies in the region, President Alan Garcia is seeking to increase the government profit from minerals – a campaign pledge – but he is taking a gentler approach so as not to scare investors. So far, he has been able to extract a "voluntary" tax of 3 percent, says Mr. Tissot. But it remains to be seen how patient the population will remain with his softer stance.
Leading the pack is Venezuela, the world's fifth-largest oil exporter. In the past year, Chávez has gradually asserted more state control over oil production, targeting joint ventures first. He has declared May 1 as the deadline for state majority control in the extra-heavy oil products in the Orinoco River basin. Analysts expect the natural-gas industry to be among the next targets, says Mr. Bailey.
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