Petrobras, Repsol Agree to Bolivias Oil, Gas Law

Petroleo Brasileiro SA, Bolivia’s biggest foreign investor, and Repsol-YPF SA agreed to the South American nation’s new energy law, pledging to search for more natural gas deposits.

Petrobras and Repsol were among eight companies that early today signed agreements with the Bolivian government, adding to accords with Total SA and Occidental Petroleum Corp. yesterday.

“The other option would have been to leave,” said Enrique Soldevila, an analyst at Banco BPI SA in Madrid with a “reduce” rating on Repsol, Europe’s fifth-largest oil company. “We have to see what the conditions are now.”

Bolivia, South America’s poorest nation, needs finance and technical expertise to develop its natural gas reserves and boost exports to Argentina and Brazil. Bolivia has yet to reach an agreement with Brazil over natural gas prices and the status of Petrobras’s existing refineries in the country.

“We want partners to help solve our economic problems,” Bolivia President Evo Morales said today on state radio station Nueva Patria. “We are never going to violate these agreements.”

Bolivian Law

Under the terms of Bolivia’s nationalization law, the state’s share of revenue from the San Alberto and San Antonio gas fields in the nation’s south will rise to 82 percent from 50 percent, the Associated Press reported today. Petrobras, Repsol and Total are all investors in the two fields, which produce about 70 percent of the country’s natural gas.

Petrobras and Bolivia “reached an agreement allowing the company to remain in Bolivia and in the exploration and production business in the San Alberto and San Antonio fields” in southern Bolivia, according to a statement on Petrobras’s Web site.

Petrobras has not reached agreement with Bolivia on the price of natural gas exported to Brazil or on the future of its refining operations in the country, the statement said. Petrobras runs Bolivia’s two refineries, producing all the country’s gasoline and aviation fuel and 70 percent of its diesel oil.

The Petrobras statement did not mention any specific terms, tax rates, ownership conditions or prices covered by the agreement.

Total’s Investment

The new agreements with the foreign energy companies as well as a recent accord to boost natural gas exports to Argentina will provide Bolivia with more than $4 billion a year from 2010, Morales was quoted as saying on state new service agency ABI’s Web site.

Total, based in Paris, will invest $728 million in a gas field it plans to operate along with state oil company YPF Bolivianos SA and will spend $1.15 billion exploring for gas in the Incahuasi and Aquiro gas deposits over 20 years, Hydrocarbons Minister Carlos Villegas was cited as saying on ABI’s Web site on Oct. 27.

A Total spokeswoman in Paris, Patricia Marie, yesterday declined to confirm the figures.

“This agreement is in line with Bolivian President Evo Morales’s public commitment to guarantee legal security for investments, a principle that Repsol YPF considers indispensable for the development of its business in the country,” Madrid- based Repsol said in an e-mail statement today. “The new contracts guarantee the profitability of the investments made until now in Bolivia as well as those that will be made in the future.”

Repsol

The company declined to comment on the terms of the new agreements.

Repsol said it has exploration rights over seven blocks with total area of 9,264 square kilometers and rights to drill oil from 25 blocks with a total area of 2,174 square kilometers. The company said it has invested $1.17 billion in Bolivia in the past decade, which has led to the creation of 3,300 jobs, 300 of which are employees at Repsol.

Bolivia also signed an agreement with Vintage Petroleum Inc., which Los Angeles-based Occidental bought in January for $4.1 billion. The agreement says Occidental will explore for gas in the Naranjillo and Chaco Sur deposits, spending $220 million.

Since 1994, Petrobras has invested $1.5 billion in Bolivia on oil and gas exploration and production, construction and expansion of pipelines and to renovate the two refineries.

Petrobras Compensation?

Brazil may seek compensation from Bolivia for the two refineries, which would become the property of YPF Bolivianos, Brazil’s Mines and Energy Minister Silas Rondeau said on Brazilian TV.

Morales, elected as Bolivia’s president last year, on May 1 sent soldiers to take over the country’s natural gas industry and threatened to evict foreign companies if they didn’t agree to hand over their assets to YPF Bolivianos within 180 days.

Bolivia agreed with Argentine President Nestor Kirchner on Oct. 19 to almost quadruple natural gas supplies to Argentina, lessening Bolivia’s dependence on the Brazilian market. Bolivia supplies over half of Brazil’s gas needs.

Other companies that signed the agreement include Pluspetrol SA, BG Group Plc, Empresa Petrolera Andina SA, and Pan American Energy.