[Marxism] Evo Morales' Complete Victory Over Big Oil
marvgandall at videotron.ca
Mon Nov 6 14:00:49 MST 2006
> Counterpunch, November 6, 2006
> Evo Morales' Complete Victory Over Big Oil
> The Progress in Bolivia
> By NEWTON GARVER
> I have previously argued that Evo Morales might best be described as a
> genius rather than put into any of the ready-made political categories
> that so regularly distort both news and policy. ...
The Economist also characterizes the energy deal with the oil firms as a
"big political victory" for Morales, but not a complete one. It involved
some compromise so that "the terms are less draconian than the May 1st
decree" - notably in relation to the 50% taxes and royalties Petrobras will
be expected to pay, which are more "in line with" the law which prompted the
overthrow of the Mesa government last year.
Although the industry will be majority-owned by the state, the degree of
authority left to the companies is still unclear, as is the extent of their
promised future investment, and negotiations are still ongoing with
Petrobras about compensation and the pricing of gas exports to Brazil.
Nevertheless, as the Economist notes, the terms imposed on the companies are
"much harsher" than their existing contracts, and will eventually give the
government an additional $4 billion in revenues for development.
* * *
A hard bargain
Nov 2nd 2006 | LA PAZ AND SÃO PAULO
From The Economist print edition
Evo Morales deals and wins on gas
WHEN Evo Morales, Bolivia's socialist president, announced the
"nationalisation" of his country's oil and gas on May 1st, he gave the
foreign companies that had invested $3.5 billion in the industry six months
to accept new contracts. These would turn them into heavily taxed providers
of services to Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), the
revived state energy company. Just minutes before the deadline, late on
October 28th, ten energy companies signed up to new terms that Mr Morales
said will raise the government's energy revenues to $1 billion this year and
four times as much by 2010.
That is a big political victory for the president. But several important
details have yet to be decided. And it is not clear whether the new terms
will reverse the precipitate fall in investment (see chart), and thus enable
Bolivia to develop its reserves of natural gas, which are the second-biggest
in South America.
The nationalisation began with a bang in May, when Mr Morales led troops in
occupying a gasfield operated by Petrobras, Brazil's state-owned energy
company. But the government was slow to draw up new contracts. In September
the president fired his energy minister after Brazil objected to his plan to
expropriate refineries owned by Petrobras. He had earlier sacked the head of
The new terms are less draconian for the companies than the May 1st
nationalisation decree, but much harsher than their original contracts.
Petrobras, the biggest operator, with almost half of the gas reserves, will
now pay royalties and taxes of 50% on its two biggest fields, down from 82%
under the decree. After Petrobras defrays its costs (including amortisation)
it will split the remaining revenue with YPFB under a variable formula.
Broadly speaking, that is in line with a 2005 law approved under the
government of Carlos Mesa. Mr Morales had judged this law so weak that he
led the street protests that overthrew Mr Mesa. Other companies, including
Spain's Repsol, Total of France and BG of Britain have signed similar new
contracts. In some mature fields the tax take will total 80%.
The new contracts give YPFB majority ownership of the industry. But the
companies will be rather more than mere service providers. "We're not losing
ownership," insists José Sérgio Gabrielli, Petrobras's chief executive. His
company will be "partners" with YPFB, which will have the right to
"supervise" decisions on suppliers, he says. How that will work in practice
is unclear. Talks are continuing over Petrobras's demand for compensation
for its two Bolivian refineries, which are supposed to be turned over to
YPFB. Also still under negotiation is an increase in the price Brazil pays
for Bolivian gas from the present $4.20 per million BTUs.
Petrobras has largely amortised its investment in the gasfields and has
"very good cash flow" from them, says Mr Gabrielli. He adds that the
contracts guarantee Petrobras a rate of return on capital of over 15% and
that the company can continue to book Bolivian gas reserves.
Juan Carlos Ortiz, the president of YPFB, said the companies have promised
new investment totalling some $3.5 billion. But Petrobras insists it has
made no new commitments and has no plans to expand in Bolivia. Brazil had no
choice but to negotiate because it relies on Bolivia for half its gas. But
earlier plans to double the capacity of the gas pipeline from Bolivia have
been suspended. Petrobras is investing to boost gas production at home.
Mr Morales's hopes of increasing gas exports lie with Argentina. Its
president, Néstor Kirchner, last month signed a deal under which imports of
Bolivian gas would quadruple to match those of Brazil, at an initial price
of $5 per million BTUs. This requires a new pipeline, costing $1.2 billion,
as well as investment in developing new gasfields.
A triumphant Mr Morales hailed the new contracts as a big step towards
solving Bolivia's social problems. He has wisely struck a bargain with the
companies, albeit one that is so hard as to risk being counter-productive.
In similarly pragmatic vein, this week he said he was postponing previously
announced plans to nationalise Bolivia's mining industry, because he lacked
the necessary funds. Having secured extra revenues from gas, his task now
will be to spend them wisely.
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