Repsol-YPF Freezes $500 Million Investments in Bolivia

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Only a week after the inauguration of Bolivia’s new president, Evo Morales, Repsol-YPF decided to freeze nearly $500 million worth of investments in the country. This will decrease total expected investments in Bolivia between 2006 and 2009 by 50%. The decision was made in response to new Bolivian laws that decrease profits from sales of Bolivia’s natural gas, is also seen as a strategic move that became necessary after Repsol-YPF revised their worldwide energy reserves estimate downward 25%.

In light of Bolivia’s newly passed “Law of Hydrocarbons,” YPF reduced its estimated available reserves in Bolivia significantly (accounting for 52% of the total decrease in global energy reserves). Reductions in estimates of available reserves in Argentina accounted for 41% of the downward revision, while 4.7% was attributed to Venezuela and 2.2% to the rest of the world. According to the new Bolivian Hydrocarbon Secretary, Andres Soliz Radathe, Repsol-YPF was forced to manage itself according to the rules Bolivia imposes regarding measuring gas reserves. From now on, YPF should only account for its proven reserves and not for probable ones, according to Soliz.

Soliz is not worried about Repsol YPF’s announcement: “The estimated value of Bolivia’s gas reserves is $150 billion and we can … quadruple that amount; our government is preserving its state property.”

Antonio Brufau, Repsol YPF´s president, declared that “the decrease in investments and the significant reduction of its estimated available reserves in Bolivia is a result of changes made by Bolivia’s newly passed ‘Law of Hydrocarbons,’ which results in certain areas and projects being no longer economically feasible.” Moreover, he said “specifically, it indicates an increase of between 18% and 50% in regalia,” which is the amount of money paid by petroleum companies to the Bolivian State for the use of its territory and resources. This regalia requirement comes from the fact that under the Bolivian Constitution, Article 139 claims that Bolivia owns all petroleum discovered in its domestic territory. The passing of this new “Law of Hydrocarbons” applies even stricter commercial restraints to hydrocarbons exploration and regalia requirements. Foreign petroleum companies will have to sign new contracts changing the amount of regalia they must pay the government. No contract has been signed yet though.

Bolivia’s Government accuses Repsol YPF of fraud for having registered itself as the owner of the country’s 48.7 billion cubic feet gas reserves. As a consequence of this, Soliz promised to file complaints them in the international markets.

Repsol-YPF’s president declared that the Company is “open to negotiations” with the new Bolivian authorities and has claimed to be mostly concerned with the promotion and success of Bolivia and the petroleum companies working in the country (including Petrobras and the British BG among others).

Next week Morales is planning to announce Bolivia’s plans to renationalize energy companies. He wants to reassure the Spanish government and investors that he does not want to expropriate the companies. Rather, he wants to change the terms of trade with them so the Bolivian state gets a bigger share of revenues from petroleum and natural gas sales.

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