Global Insight Perspective | |
Significance | The government has announced that it is taking full control of the country's largest natural gas-transportation company after failing to reach an accord with its foreign shareholders. |
Implications | Ashmore Energy International (AEI) and Shell, the largest shareholders in the company, like Petrobras before them, will be paid compensation, but the “forced” takeover of their assets will not help to ease concerns about juridical security in the country. |
Outlook | Production has peaked and more investment is needed in order for Bolivia to fulfil its export commitments with Argentina and Brazil; however, the latest government threats will not help to create a positive climate for investment. |
Government Takes Over Transredes
The government has nationalised TR-Holdings, a consortium comprising AEI and Shell that owns 50% of the gas-transportation company Transredes, via Supreme Decree 29586 promulgated by President Evo Morales yesterday in a symbolic ceremony at a plant owned by the company in Santa Cruz. A new president of Transredes was also sworn in yesterday: Gary Daher. The move will enable the state oil company YPFB to raise its stake in Transredes to 99%, according to a report by the state news agency ABI. YPFB will pay TR-Holdings US$48 per share in Transredes, which, according to a report in La Razón, will bring the total payment up to US$241 million, less than the US$263.5 million that Enron and Shell initially paid for a 50% stake in Transredes when the company was “capitalised” or partially privatised in the 1990s. Transredes operates over 3,000 km of gas pipelines in Bolivia and 2,700 km of oil pipelines. It also has stakes in the Bolivian and Brazilian tranches of the 30-mmcm/d capacity Bolivia-Brazil gas pipeline.
The government had stepped up pressure on the capitalised energy companies Andina, Chaco, and Transredes and the privatised Compañía Logística de Hidrocarburos de Bolivia (CLBH) to agree to sell the few additional shares that YPFB required to acquire a controlling stake, through three supreme decrees issued on 1 May. The transfer of these shares was the missing element before the government could claim that its hydrocarbons nationalisation programme was complete (see Bolivia: 2 May 2008: President of Bolivia Steps Up Oil Nationalisation Before Opposition’s "Unconstitutional" Referendum). However, the announcement that the government is buying out Shell and AEI suggests that it has run out of patience with negotiations to acquire just an additional 2.66% stake. According to the Minister of Hydrocarbons Carlos Villegas, Shell had agreed to sell its 25% stake, but AEI had refused to sell its shares.
Lashing out at Ashmore and Enron, the shares of which AEI had acquired, Morales accused the two of playing politics and promoting “a conspiratorial plan” against his government. In particular, he accused Transredes of prioritising relationships with prefects (governors) from opposition provinces over the national government.
As for the other capitalised companies: an agreement was reached with Repsol-YPF prior to 1 May for the sale of shares equivalent to a 1.08% stake in its Andina subsidiary to Bolivia’s national YPFB energy firm; an agreement was reached with BP on Friday for the sale of shares in Chaco; and the state has intervened in CLHB.
Outlook and Implications
The implementation of the nationalisation decree signed by President Evo Morales on 1 May 2006 is essentially completed with the takeover of the capitalised companies. Under the nationalisation programme new oil contracts with foreign companies were signed in late October 2006 and, the following year, Bolivia reached an agreement with Petrobras that would allow the “return” of the two refineries it owns in Bolivia. Plans are also under way for the re-founding of YPFB, although the state oil company continues to be beset with problems.
However, the biggest challenge continues to be fast-tracking investment in natural gas exploration and production. The government is therefore also stepping up pressure on foreign companies on this issue. Last month, President Morales warned oil companies that the state will “recover” oil and gas fields through YPFB if they fail to fulfil their investment commitments. This threat was reiterated a few days ago by the head of YPFB Santos Ramírez, who gave foreign oil companies operating in the country a 10-day deadline to demonstrate that they are complying with their investment commitments. The companies themselves have blamed delays in the award of environmental permits, but continued legal uncertainty and the political situation may be other factors in why companies are not rushing to invest.