Business as Usual for Petrobras Despite Changes by Bolivian Govt

Brazil's federal energy company Petrobras (NYSE:PBR) will continue operating in Bolivia despite government changes and a possible clampdown on foreign oil and gas operations in the country, Brazil's ambassador to Bolivia, Antonio Gonçalves, said in an interview on Globo television.

"Brazil and Bolivia are partners in a very strict sense," Gonçalves said. "Brazil does not expect any kind of hostility towards Brazil or Petrobras."

Gonçalves was referring to recent declarations by Bolivia's president-elect Evo Morales that the country would nationalize its hydrocarbons reserves.

This would affect Petrobras directly since it has exploration and production operations in Bolivian gas fields, exports some 22 million cubic meters a day (Mm3/d) of gas to Brazil through the Brazil-Bolivia pipeline and owns the country's two largest refineries.

Brazilian natural gas distribution companies sell some 41Mm3/d of natural gas.

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. "What Morales wants to do is to increase the government's influence in the management of the reserves already nationalized by the hydrocarbons law [approved earlier this year]."

The law 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 CEO José Gabrielli will reportedly visit Bolivia in the coming days to discuss changes to Petrobras contracts there.

Brazil's left-of-center President Luiz Inácio Lula da Silva is scheduled to meet with Morales on January 13 to discuss bilateral relations before Morales is sworn in on January 22.

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