Companies Evaluate Stance Towards New Administration in Bolivia

Foreign oil companies with operations in Bolivia are reevaluating their positions in the country following the result of the presidential election on Sunday won by socialist candidate Evo Morales, who has promised to nationalize the country's hydrocarbons industry.

Morales announced on Monday he plans to scrap the country's 71 existing hydrocarbons contracts held by foreign companies, which he says were never approved by congress and are therefore invalid.

Even before the election, foreign companies were concerned about the new hydrocarbons law that requires companies to sign new exploration and production contracts with a combined tax and royalty rate of 50% on hydrocarbons production.

The 180-day period established by law for contracts held by foreign companies to "migrate" to the new terms lapsed on November 15 without any companies agreeing to do so.

PETROBRAS

Brazil's federal energy company Petrobras (NYSE: PBR) will keep future investments "frozen" while waiting to see how Morales' election will affect the industry, Bolivian paper Correo del Sur reported. Among the "frozen" projects is a plan to increase gas production and the construction of a petrochemicals project on the border region with Brazil, the paper reported.

"Of course we want to preserve our interests: no one will throw money out the window," Dow Jones reported company international affairs adviser Marco Aurelio Garcia as saying to local media.

Petrobras has invested some US$1.5bn in Bolivia since the opening of the energy sector in 1996, representing 43% of total investment by foreign oil companies.

Petrobras controls 14% of Bolivia's gas reserves, Argentine newspaper Ambito Financiero reported.

Petrobras anticipates the new government will seek a dialogue with energy companies in January, Dow Jones quoted Petrobras International Director Nestor Cervero as saying.

REPSOL YPF

Even as shares in Spanish oil company Repsol YPF (NYSE: REP) fell on news of Morales' victory on Monday, company president Antonio Brufau sent Morales his congratulations and expressed his desire to continue working with Bolivia, Ambito Financiero reported.

Repsol YPF controls 25.7% of Bolivia's gas reserves and like Petrobras has too much invested in the country to risk a sour relationship with the new government.

OTHER FIRMS

French oil and gas group Total refused to speculate on the impact of the election on its operations, the paper reported.

"Giving comment now would be pure speculation: we are closely following the political evolution in Bolivia, but we will not comment," the paper quoted a spokesperson as saying.

Total has operated in Bolivia since 1995 with 15% participation in two gas fields, both of which are operated by Petrobras, the paper reported.

UK firm BG Group said it intends to remain in the country for the long term and expressed a desire to resolve any problems that arise with the new administration.

US oil company ExxonMobil, which does not yet have any exploration activities in Bolivia, also hopes to have a good relationship with the future government.

"As with any other country, ExxonMobil hopes to be able to operate in fiscally attractive conditions in a fair investment climate," the paper quoted a spokesperson as saying.

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