La Paz – Bolivian President Evo Morales’s top policy initiative – the nationalization of the energy industry – is at risk of failure because of mismanagement and other problems at state-owned oil company YPFB, according to diplomats and media reports.
YPFB, which was expected to be in charge of the nationalization process, was accused in July by the Hydrocarbons Administration and again Monday night by the Hydrocarbons Ministry of violating the decree issued by Morales by signing a contract with an intermediary to export crude to Brazil.
Morales, a socialist, signed an executive order in May nationalizing and giving the state “absolute control” over Bolivia’s huge reserves of natural gas and lesser ones of oil.
Under the terms of the decree, foreign energy firms operating in Bolivia had to deliver all their production to YPFB for distribution and processing.
The foreign companies were given six months to adjust their existing operating contracts or leave the country.
The last few weeks have been dark ones for YPFB and its chief, Jorge Alvarado, who has had to battle additional corruption allegations and announced that the company would be unable to take up the role of energy monopoly given to it by Morales’s executive order.
“The hydrocarbons issue is giving us a lot of headaches,” presidential chief of staff Juan Ramon Quintana said, adding that the government did not have people trained to take apart the “spiderweb” of contracts that must be renegotiated with foreign energy companies.
Opposition legislators and newspapers have called on Alvarado to resign or be fired as soon as possible, but Morales said he would wait for the results of an ongoing investigation of the alleged irregularities at YPFB.
Presidential spokesman Alex Contreras said, in response to reporters’ questions Tuesday about what the government planned to do now that the Hydrocarbons Ministry had confirmed that YPFB violated the executive order, that Alvarado had 10 days to respond to the allegations and no action would be taken until then.
Contreras stuck to Morales’s line that the problems at YPFB were the result of a plot by domestic and foreign interests to halt the nationalization of the energy industry.
“What power does the chairman of YPFB have over the head of state so that, despite all the alleged irregularities, he can continue affecting the image of the state oil company?” the La Prensa newspaper asked in an editorial on Monday.
In addition to Alvarado, corruption allegations have been leveled against YPFB executive Manuel Morales because a consulting firm to which his father is indirectly linked got a contract to audit the investments made by Brazilian oil giant Petrobras.
Both Alvarado and Manuel Morales, who serves as the top adviser to the YPFB chief, have denied the allegations, while Bolivia’s energy minister, Andres Soliz, first backed the head of the state-owned oil company and later distanced himself from him.
On Aug. 1, the Hydrocarbons Ministry revoked two regulations issued four days earlier that gave YPFB complete control over the domestic and foreign marketing of oil, gas and other derivatives.
Soliz said at the time that the move was made because YPFB did not have the resources to take over the marketing function, which would cost $180 million.
YPFB has also failed to obtain the 50 percent plus one share of the stock of the various renationalized joint venture companies, including the Bolivian units of Spain’s Repsol YPF and Petrobras, despite the provisions of the executive order.
The negotiations with these and other foreign energy companies have gone nowhere even though nearly four months have elapsed since the decree was issued.
“The government says that the oil companies are jeopardizing the progress of the nationalization. As a political and mobilizing message, perhaps, the denunciation makes sense, but looking at it clearly it is absurd,” La Razon newspaper columnist and political analyst Humberto Vacaflor said.
Vacaflor said Morales made a mistake in how he proceeded with the nationalization, and it may even be erroneous to call it that, because “the revolution is dependent on the checkbooks of the oil companies,” which will not pay YPFB anything until the government pays them compenstion.
“The character of this ‘nationalization’ was also captured by the Sao Paulo welder who is president of Brazil. Luiz Inacio Lula da Silva said a month ago that Petrobras was waiting for the Bolivian government to pay the compensation it had coming for its assets, to leave,” Vacaflor said.
The nationalization was announced May 1 by Morales at the San Alberto field, Bolivia’s largest, which is operated by Petrobras.
Under the decree, the San Alberto and Sabalo fields, the sources of 70 percent of the natural gas exported by Bolivia and which are both operated by Petrobras, were required to turn over 82 percent of their production to YPFB, generating some $300 million in additional revenues for La Paz in 2007.
Bolivia said at the time that it expected to increase its annual revenues from the current $460 million to $780 million in 2007.
The Andean nation has an estimated 48 trillion cubic feet of natural gas, giving it the second-largest reserves in South America after Venezuela.
Spain’s Repsol YPF, Brazil’s Petrobras, Britain’s BG Group, BP Plc, French-Belgian TotalFinaElf, U.S.-based Panamerican Energy and Exxon Mobil Corp., Argentina’s Pluspetrol, Canadian Energy and South Korea’s Dong Wong are among the energy companies operating in Bolivia.
The Andean nation’s two previous experiences with nationalization came under markedly different circumstances.
On both of those occasions, Bolivia’s natural gas was under the control of a single foreign company, whereas now nearly a dozen firms are extracting the country’s hydrocarbons.
In 1937, in the first action of its kind in South America, La Paz booted out Standard Oil, then the world’s most powerful oil company, while the 1969 nationalization affected the Gulf Oil Company.
