The Bolivian government expects investment in the energy sector to grow next year, despite the hostility of foreign oil companies to nationalization. Carlos Villegas, minister of energy and hydrocarbons, said this week in Washington that 2008 will be “the beginning of a new phase of important investments in hydrocarbons in Bolivia”.
The investment plans for next year will be decided on December 15, Villegas said, in response to a question from Emerging Markets. “The companies have a commitment, [and] last week were presented the plan for 2008. We are negotiating,” he said. No details were provided about the source, or amounts, of expected investments.
Bolivia has the second largest natural gas reserves in South America, with proven reserves of 24 trillion cubic feet and an additional 30 trillion cubic feet of possible reserves – enough to supply the entire southern Cone for a decade, analysts say. Bolivia’s principal export markets are Argentina, where the economy is growing rapidly, and Brazil.
The investment that Villegas alludes to may come from unconventional sources, analysts say. “We are likely to see a change in the nature of investors – more small-scale, more opportunity-driven companies looking for smaller projects, not as penalized by the current system,” Roger Tissot, Latin America analyst with PFC Energy. Energy companies from China and India could come into Bolivia and also Venezuela’s state firm, PDVSA, might partner with the Bolivian state firm, YPFB, analysts suggested.
Others are sceptical about whether foreign companies will go into Bolivia in the wake of the nationalization of the gas fields by President Evo Morales last year. “To attract new investment in Bolivia, you need to create a foreign investor-friendly environment, and recent behaviour moves in the opposite direction,” Gianfranco Bertozzi, Andes analyst with Lehman Brothers, said.
Under the terms of the 2006 nationalization, the state owns and controls energy resources, and foreign operators had to accept these new rules in order to continue operating in Bolivia. Petrobras has stepped up gas production in Brazil, with a view to ending imports from Bolivia in the near term.
Bolivia’s nationalization format is a “significant contribution” to developing the gas sector, Villegas argued, in a lecture organized by the Center for Economic and Policy Research, a Washington DC-based think tank. Neither Petrobras or Repsol YPF, the other major foreign company operating in Bolivia, were available for comment.