Identifier
Created
Classification
Origin
06LAPAZ1157
2006-05-02 15:54:00
UNCLASSIFIED
Embassy La Paz
Cable title:
PRESIDENT NATIONALIZES HYDROCARBONS
how-toVZCZCXYZ0000 PP RUEHWEB DE RUEHLP #1157/01 1221554 ZNR UUUUU ZZH P 021554Z MAY 06 FM AMEMBASSY LA PAZ TO RUEHC/SECSTATE WASHDC PRIORITY 9021 INFO RUEHAC/AMEMBASSY ASUNCION 5797 RUEHBO/AMEMBASSY BOGOTA 3092 RUEHBR/AMEMBASSY BRASILIA 6955 RUEHBU/AMEMBASSY BUENOS AIRES 4197 RUEHCV/AMEMBASSY CARACAS 1493 RUEHPE/AMEMBASSY LIMA 1461 RUEHMN/AMEMBASSY MONTEVIDEO 3746 RUEHQT/AMEMBASSY QUITO 4135 RUEHSG/AMEMBASSY SANTIAGO 8678 RHEHNSC/NSC WASHINGTON DC RHEBAAA/DEPT OF ENERGY WASHINGTON DC RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS LA PAZ 001157
SIPDIS
SIPDIS
STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW
E.O. 12958: N/A
TAGS: ECON EINV ENRG EPET BL
SUBJECT: PRESIDENT NATIONALIZES HYDROCARBONS
REF: A. LA PAZ 869
B. LA PAZ 1107
UNCLAS LA PAZ 001157
SIPDIS
SIPDIS
STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW
E.O. 12958: N/A
TAGS: ECON EINV ENRG EPET BL
SUBJECT: PRESIDENT NATIONALIZES HYDROCARBONS
REF: A. LA PAZ 869
B. LA PAZ 1107
1. Summary: On May 1, the GOB issued its long-awaited Supreme
Decree "nationalizing" the hydrocarbons sector. Largely
consistent with prior GOB announcements and the May 2005
Hydrocarbons Law, the decree gives hydrocarbons companies six
months to negotiate new "service" contracts with the GOB;
transfers to the state control over the entire hydrocarbons
chain, from production to commercialization; and offers the
state oil company (YPFB) majority share of five companies,
including two with U.S. investment. It also raises taxes, at
least temporarily, by 32% on producers with large fields,
while leaving open key questions about whether the takeover
will be accomplished by payment, as required by the Bolivian
Constitution, or by expropriation. Military troops
symbolically occupied 56 oil and gas installations
immediately following the president's announcement. End
Summary.
2. On May 1, President Morales issued Supreme Decree 28701,
postponed since April (ref A),"nationalizing" the
hydrocarbons sector. With some exceptions, the decree is
consistent with previous GOB statements. The decree gives
the companies six months to negotiate new service contracts
with the GOB, and requires that each new contract be approved
individually by Congress. During the interim period, the GOB
plans to audit the companies to verify levels of recouped
investment and to assign final, differential tax rates to
each company. The May 1 Decree also included the following:
-- The State will gain control of the entire hydrocarbons
chain: production, transportation, refining, storage,
distribution, commercialization, and industrialization. YPFB
(the state oil company) will determine volumes, prices, and
conditions for commercialization of hydrocarbons for the
internal market and for export. YPFB will be involved in the
complete hydrocarbons production chain. YPFB will be
restructured within 60 days.
-- YPFB will take over 50 percent plus one of the shares of
the capitalized (partially privatized) companies, Transredes
(U.S.),Chaco (U.S.),and Andina (Spain/Argentina). This
will be accomplished by confiscating the shares held in trust
by the Bolivian Collective Capitalization Fund for payment of
Bolivian pension funds (approximately 45 percent),and by
forcibly acquiring the rest from the companies.
-- YPFB will take over 50 percent plus one of the shares of
Petrobras Bolivia Refining (Brazil) and the Bolivian
Hydrocarbons Logistics Company (Germany/Peru). These are
fully privatized companies, and would require a greater
government investment to "take over."
3. The decree also contained a previously unannounced
provision for a temporary 32 percent tax increase on
companies operating in the mega-fields of San Alberto and San
Antonio, mainly Petrobras (Brazil),Repsol YPF (Spain and
Argentina),and Total (France, with U.S. investment by
ExxonMobil).
4. It also left open key questions on how the takeovers are
to be accomplished. According to Bolivia's Constitution,
nationalization requires compensation. If the government
intends to purchase the shares taken over from the companies,
it is unclear where the funds to do this would come from.
The same is true for the government's continued payment of
pension funds, which Morales guaranteed in his announcement.
5. Petrobras officials told us they would hold a meeting in
Brasilia on May 2 to discuss their response. According to a
Brazilian Embassy official, President Lula will chair the
meeting, and the Ministers of the Presidency and of Energy,
along with the President of Petrobras, will participate. The
Embassy official further noted Brazil's "surprise" at the
Bolivian government's unilateral announcement and that Lula's
domestic opponents were already seeking to make political hay
out of Evo Morales' dissapointing actions.
6. After the decree was announced, Armed Forces troops were
sent to occupy 56 oil and gas installations. Contacts at
Transredes (U.S. pipeline operator) told us that the troops
had entered their offices peacefully, without attempting to
hinder operations.
7. Comment: Of the U.S. investors in Bolivia's hydrocarbons
sector; i.e., Chaco (Pan-American),Transredes (Prisma),
Vintage (Occidental),ExxonMobil (in partnership with French
company Total),and BTG (pipeline operator); Transredes (with
approximately USD 500 million invested) and Chaco will be
hardest hit by the decree due to the GOB's plan to gain
control of their operations. Company officials express grave
concern privately about the decree, but thus far have
preferred to refrain from public comments about it. End
comment.
GREENLEE
SIPDIS
SIPDIS
STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW
E.O. 12958: N/A
TAGS: ECON EINV ENRG EPET BL
SUBJECT: PRESIDENT NATIONALIZES HYDROCARBONS
REF: A. LA PAZ 869
B. LA PAZ 1107
1. Summary: On May 1, the GOB issued its long-awaited Supreme
Decree "nationalizing" the hydrocarbons sector. Largely
consistent with prior GOB announcements and the May 2005
Hydrocarbons Law, the decree gives hydrocarbons companies six
months to negotiate new "service" contracts with the GOB;
transfers to the state control over the entire hydrocarbons
chain, from production to commercialization; and offers the
state oil company (YPFB) majority share of five companies,
including two with U.S. investment. It also raises taxes, at
least temporarily, by 32% on producers with large fields,
while leaving open key questions about whether the takeover
will be accomplished by payment, as required by the Bolivian
Constitution, or by expropriation. Military troops
symbolically occupied 56 oil and gas installations
immediately following the president's announcement. End
Summary.
2. On May 1, President Morales issued Supreme Decree 28701,
postponed since April (ref A),"nationalizing" the
hydrocarbons sector. With some exceptions, the decree is
consistent with previous GOB statements. The decree gives
the companies six months to negotiate new service contracts
with the GOB, and requires that each new contract be approved
individually by Congress. During the interim period, the GOB
plans to audit the companies to verify levels of recouped
investment and to assign final, differential tax rates to
each company. The May 1 Decree also included the following:
-- The State will gain control of the entire hydrocarbons
chain: production, transportation, refining, storage,
distribution, commercialization, and industrialization. YPFB
(the state oil company) will determine volumes, prices, and
conditions for commercialization of hydrocarbons for the
internal market and for export. YPFB will be involved in the
complete hydrocarbons production chain. YPFB will be
restructured within 60 days.
-- YPFB will take over 50 percent plus one of the shares of
the capitalized (partially privatized) companies, Transredes
(U.S.),Chaco (U.S.),and Andina (Spain/Argentina). This
will be accomplished by confiscating the shares held in trust
by the Bolivian Collective Capitalization Fund for payment of
Bolivian pension funds (approximately 45 percent),and by
forcibly acquiring the rest from the companies.
-- YPFB will take over 50 percent plus one of the shares of
Petrobras Bolivia Refining (Brazil) and the Bolivian
Hydrocarbons Logistics Company (Germany/Peru). These are
fully privatized companies, and would require a greater
government investment to "take over."
3. The decree also contained a previously unannounced
provision for a temporary 32 percent tax increase on
companies operating in the mega-fields of San Alberto and San
Antonio, mainly Petrobras (Brazil),Repsol YPF (Spain and
Argentina),and Total (France, with U.S. investment by
ExxonMobil).
4. It also left open key questions on how the takeovers are
to be accomplished. According to Bolivia's Constitution,
nationalization requires compensation. If the government
intends to purchase the shares taken over from the companies,
it is unclear where the funds to do this would come from.
The same is true for the government's continued payment of
pension funds, which Morales guaranteed in his announcement.
5. Petrobras officials told us they would hold a meeting in
Brasilia on May 2 to discuss their response. According to a
Brazilian Embassy official, President Lula will chair the
meeting, and the Ministers of the Presidency and of Energy,
along with the President of Petrobras, will participate. The
Embassy official further noted Brazil's "surprise" at the
Bolivian government's unilateral announcement and that Lula's
domestic opponents were already seeking to make political hay
out of Evo Morales' dissapointing actions.
6. After the decree was announced, Armed Forces troops were
sent to occupy 56 oil and gas installations. Contacts at
Transredes (U.S. pipeline operator) told us that the troops
had entered their offices peacefully, without attempting to
hinder operations.
7. Comment: Of the U.S. investors in Bolivia's hydrocarbons
sector; i.e., Chaco (Pan-American),Transredes (Prisma),
Vintage (Occidental),ExxonMobil (in partnership with French
company Total),and BTG (pipeline operator); Transredes (with
approximately USD 500 million invested) and Chaco will be
hardest hit by the decree due to the GOB's plan to gain
control of their operations. Company officials express grave
concern privately about the decree, but thus far have
preferred to refrain from public comments about it. End
comment.
GREENLEE