Identifier
Created
Classification
Origin
06LAPAZ2900
2006-10-25 21:33:00
CONFIDENTIAL
Embassy La Paz
Cable title:
HYDROCARBONS CONTRACT DEADLINE DRAWS NEAR
how-toVZCZCXYZ0000 PP RUEHWEB DE RUEHLP #2900/01 2982133 ZNY CCCCC ZZH P 252133Z OCT 06 FM AMEMBASSY LA PAZ TO RUEHC/SECSTATE WASHDC PRIORITY 1082 INFO RUEHAC/AMEMBASSY ASUNCION 6214 RUEHBO/AMEMBASSY BOGOTA 3531 RUEHBR/AMEMBASSY BRASILIA 7393 RUEHBU/AMEMBASSY BUENOS AIRES 4653 RUEHCV/AMEMBASSY CARACAS 1904 RUEHPE/AMEMBASSY LIMA 1955 RUEHLO/AMEMBASSY LONDON 0087 RUEHMD/AMEMBASSY MADRID 3153 RUEHME/AMEMBASSY MEXICO 1835 RUEHMN/AMEMBASSY MONTEVIDEO 4107 RUEHFR/AMEMBASSY PARIS 0092 RUEHQT/AMEMBASSY QUITO 4542 RUEHSG/AMEMBASSY SANTIAGO 9116 RUEHSO/AMCONSUL SAO PAULO 2009 RHEHNSC/NSC WASHINGTON DC RHEBAAA/DEPT OF ENERGY WASHINGTON DC RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC
C O N F I D E N T I A L LA PAZ 002900
SIPDIS
SIPDIS
STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW
E.O. 12958: DECL: 10/25/2016
TAGS: ECON EINV ENRG EPET BL
SUBJECT: HYDROCARBONS CONTRACT DEADLINE DRAWS NEAR
REF: SAO PAULO 1143
Classified By: Ambassador Philip Goldberg for reasons 1.4 (b) and (d).
C O N F I D E N T I A L LA PAZ 002900
SIPDIS
SIPDIS
STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW
E.O. 12958: DECL: 10/25/2016
TAGS: ECON EINV ENRG EPET BL
SUBJECT: HYDROCARBONS CONTRACT DEADLINE DRAWS NEAR
REF: SAO PAULO 1143
Classified By: Ambassador Philip Goldberg for reasons 1.4 (b) and (d).
1. (C) Summary: The press published a copy of the model
contract supposedly provided by the GOB to the hydrocarbons
companies who must sign new contracts by October 28,
according to the May 1 nationalization decree. The contract
appears highly favorable to Bolivia's state oil company,
YPFB. Petrobras told Econoff on October 25 that it had not
reached agreement with the GOB and indicated that it would
likely seek an extension. The press reported on October 25
that Hydrocarbons Minister Villegas said the GOB might grant
extensions to some companies and that British Gas and Total
were closer to agreement with the government than other
companies. Other sources indicate that these companies find
the contract unacceptable. End summary.
Model Contract Published
--------------
2. (SBU) The press published a copy of the model contract
that was supposedly provided to the companies by the GOB on
October 24. The contract, which contains more than 30
obligations for producers and only around 3 for YPFB, appears
unbalanced. It takes away the ownership of production, in
accord with the law, and imposes exploration and exploitation
requirements on the companies. The companies must pay YPFB
if they do not fulfill these obligations. YPFB must approve
company exploration, field development, and investment plans.
It declares that all company equipment and installations are
the property of YPFB, without mentioning any compensation.
The companies are required to insure their products,
installations, and equipment although they will belong to the
state. YPFB will receive payments directly for hydrocarbon
product sales, directly pay royalties and taxes due to the
government, and reimburse the companies for their costs and a
certain amount of profit for their services as defined in one
of the annexes. The contract forces the companies to assume
all liabilities, with no risks assumed by YPFB, even though
YPFB seeks to be the majority shareholder of five companies.
YPFB must approve a change of company control or a transfer
of company rights under the contract. Arbitration must take
place in La Paz, in Spanish, with no right to international
appeal or diplomatic recourse. The companies must provide
YPFB unspecified bank guarantees after signing the contract.
Petrobras Says No Deal
--------------
3. (C) A Petrobras executive told Econoff on October 25 that
the company has not reached agreement with the GOB regarding
its production and refinery operations. It had received a
copy of the model contract with all seven annexes, but the
annexes were incomplete. The contract provided to Petrobras
was not the same as the one published in the press, but,
according to the executive, worse. Petrobras will likely
request an extension past the October 28 deadline.
Hydrocarbons Minister Villegas stated on October 24 that
extensions might be possible for some companies, despite
earlier public statements that the deadline was firm.
Other Companies Uncertain
--------------
4. (C) The press reported on October 25 that Total (French)
and British Gas (BG) were closer to reaching agreement than
other companies. However, based on reftel and conversations
with the British DCM, it seems unlikely that BG will sign a
contract by the deadline. U.S.-owned Vintage Petroleum told
us that the model contract they were provided contained at
least four deal-breaking clauses, but they were inconclusive
about their overall negotiation strategy and wanted to know
if other companies would sign.
5. (C) Comment: It remains to be seen whether this model
contract is a negotiating ploy or a serious offer. If it is
the latter, then certainly it will impede any timely
conclusion of negotiations; if the former, it has definitely
succeeded in intimidating private hydrocarbons operators here
in Bolivia. In the short term, it seems that the GOB is
focusing on signing contracts with the smaller producers by
the October 28 deadline. There continue to be rumors of the
possibility of extending negotiations with the larger players
-- Petrobras and Repsol. End comment.
GOLDBERG
SIPDIS
SIPDIS
STATE FOR WHA/AND
TREASURY FOR SGOOCH
ENERGY FOR CDAY AND SLADISLAW
E.O. 12958: DECL: 10/25/2016
TAGS: ECON EINV ENRG EPET BL
SUBJECT: HYDROCARBONS CONTRACT DEADLINE DRAWS NEAR
REF: SAO PAULO 1143
Classified By: Ambassador Philip Goldberg for reasons 1.4 (b) and (d).
1. (C) Summary: The press published a copy of the model
contract supposedly provided by the GOB to the hydrocarbons
companies who must sign new contracts by October 28,
according to the May 1 nationalization decree. The contract
appears highly favorable to Bolivia's state oil company,
YPFB. Petrobras told Econoff on October 25 that it had not
reached agreement with the GOB and indicated that it would
likely seek an extension. The press reported on October 25
that Hydrocarbons Minister Villegas said the GOB might grant
extensions to some companies and that British Gas and Total
were closer to agreement with the government than other
companies. Other sources indicate that these companies find
the contract unacceptable. End summary.
Model Contract Published
--------------
2. (SBU) The press published a copy of the model contract
that was supposedly provided to the companies by the GOB on
October 24. The contract, which contains more than 30
obligations for producers and only around 3 for YPFB, appears
unbalanced. It takes away the ownership of production, in
accord with the law, and imposes exploration and exploitation
requirements on the companies. The companies must pay YPFB
if they do not fulfill these obligations. YPFB must approve
company exploration, field development, and investment plans.
It declares that all company equipment and installations are
the property of YPFB, without mentioning any compensation.
The companies are required to insure their products,
installations, and equipment although they will belong to the
state. YPFB will receive payments directly for hydrocarbon
product sales, directly pay royalties and taxes due to the
government, and reimburse the companies for their costs and a
certain amount of profit for their services as defined in one
of the annexes. The contract forces the companies to assume
all liabilities, with no risks assumed by YPFB, even though
YPFB seeks to be the majority shareholder of five companies.
YPFB must approve a change of company control or a transfer
of company rights under the contract. Arbitration must take
place in La Paz, in Spanish, with no right to international
appeal or diplomatic recourse. The companies must provide
YPFB unspecified bank guarantees after signing the contract.
Petrobras Says No Deal
--------------
3. (C) A Petrobras executive told Econoff on October 25 that
the company has not reached agreement with the GOB regarding
its production and refinery operations. It had received a
copy of the model contract with all seven annexes, but the
annexes were incomplete. The contract provided to Petrobras
was not the same as the one published in the press, but,
according to the executive, worse. Petrobras will likely
request an extension past the October 28 deadline.
Hydrocarbons Minister Villegas stated on October 24 that
extensions might be possible for some companies, despite
earlier public statements that the deadline was firm.
Other Companies Uncertain
--------------
4. (C) The press reported on October 25 that Total (French)
and British Gas (BG) were closer to reaching agreement than
other companies. However, based on reftel and conversations
with the British DCM, it seems unlikely that BG will sign a
contract by the deadline. U.S.-owned Vintage Petroleum told
us that the model contract they were provided contained at
least four deal-breaking clauses, but they were inconclusive
about their overall negotiation strategy and wanted to know
if other companies would sign.
5. (C) Comment: It remains to be seen whether this model
contract is a negotiating ploy or a serious offer. If it is
the latter, then certainly it will impede any timely
conclusion of negotiations; if the former, it has definitely
succeeded in intimidating private hydrocarbons operators here
in Bolivia. In the short term, it seems that the GOB is
focusing on signing contracts with the smaller producers by
the October 28 deadline. There continue to be rumors of the
possibility of extending negotiations with the larger players
-- Petrobras and Repsol. End comment.
GOLDBERG