Change in Hydrocarbons Ministry Could Help Bilateral Talks

Brazil's government sees the changes at Bolivia's hydrocarbons ministry as a sign the landlocked country is willing to continue negotiations over its nationalization plans, according to top Brazilian government officials.

The administration of Bolivia's President Evo Morales has named former planning minister Carlos Villegas to replace hydrocarbons minister Andrés Soliz, according to government statements.

"It's sign Bolivia wants to continue negotiations," said Brazil's presidential chief-of-staff Dilma Rousseff during an interview on the Bandeirantes television network.

Villegas' appointment comes after Bolivia suspended a September 12 nationalization resolution issued by Soliz. The resolution would have given Bolivia's state oil company YPFB all revenues from sales of domestic fuels, liquefied petroleum gas (LPG) and oil as well as exports from refineries.

Brazil's federal energy company Petrobras (NYSE: PBR) owns roughly 90% of Bolivia's refining capacity.

"The suspension shows Bolivia is willing to negotiate," said Brazil's mines and energy minister Silas Rondeau in a televised interview. "This will allow Petrobras to continue refining in Bolivia."

Petrobras and Brazil's government criticized Sóliz's resolution and canceled a September 15 trip to Bolivia to restart talks over compensation for Morales' May 1 nationalization decree, BNamericas previously reported.

Also in response to the resolution, Petrobras threatened to pull its refining investments in Bolivia, while Brazil's government took the Morales administration to task.

"Patience has its limits," said Brazil's President Luiz Inacio Lula da Silva after the resolution, indicating he was willing to restart talks only on clearer grounds.

"Being caught by surprise by a decision taken by a minister, which did not involve the president or the VP, makes you wonder what is going on in Bolivia," he said in a televised interview.

MINISTRY PROMISE

Villegas in his first official statement promised to hold a round of talks with oil companies on October 9 to discuss new contracts, reaffirming his commitment to follow through with Morales' nationalization program.

Petrobras CEO José Gabrielli said he expects talks to restart with YPFB before the October 9 meeting between Rondeau and Bolivian authorities, a company spokesperson told BNamericas, confirming press reports.

Bolivia's May 1 nationalization decree set November 1 as the deadline for companies to sign new contracts.

Bolivia wants to negotiate three issues in separate talks with oil companies. The first includes determining how much YPFB must pay to compensate for taking a majority share of the country's refining assets. The second is for new contracts for companies to provide E&P, refining and downstream services to YPFB. A third issue is the price of natural gas exports to Brazil.

Petrobras is the largest foreign investor in Bolivia's hydrocarbons industry.

Morales said over the weekend Bolivia will compensate for nationalization.

"There will never be an expropriation [of assets]," Bolivian state news service ABI quoted him as saying.

Petrobras plans to conclude in September an independent audit to determine the amount of compensation. The company operates two refineries in Bolivia: Gualberto Villarroel in Cochabamba with 40,000 barrel-a-day (b/d) capacity and Guillermo Elder in Santa Cruz with 20,000b/d capacity.

Bolivia's government has started a round of talks with French oil company Total (NYSE: TOT) and Britain's BG Group (NYSE: BRG).

Aside from Petrobras, the government wants to schedule talks with Spanish oil company Repsol YPF (NYSE: REP), Argentine oil company Pluspetrol and local oil company Andina.

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