Nationalization of
Bolivian Natural Gas is Part of a Broader Global Trend
May 03, 2006 — By Brad Foss, Associated Press
WASHINGTON — Soaring energy prices
are fueling a global wave of natural-resource nationalization that is
souring the investment landscape for international oil companies and
reshaping energy politics for years to come.
While it is anyone's guess as to which energy-rich developing nation
will be next to assert greater state control over its oil or natural gas
assets, analysts say it is only a matter of time before the actions of
Russia's Vladimir Putin, Venezuela's Hugo Chavez and Bolivia's Evo
Morales inspire a copycat.
"If you're an international oil company and see this trend, it must be
worrying," said Yasser Elguindi, senior managing director at Medley
Global Advisors in New York.
It should also be worrisome to energy consumers when global supplies are
already extremely tight, analysts said. They noted that non-OPEC oil
production has not lived up to its potential since 2003, when Venezuelan
President Hugo Chavez began tightening his grip on Petroleos de
Venezuela and, before that, Russian President Vladimir Putin jailed the
ex-chief of Yukos, paving the way for its prized assets to be acquired
by state-owned Rosneft.
As a result, world oil markets were even more vulnerable to supply
disruptions stemming from violence in Nigeria, war in Iraq and
hurricanes in the Gulf of Mexico. On Tuesday, crude futures shot up to
almost $75 a barrel as traders fretted about the possible outcome from
escalating tensions between the West and oil-rich Iran over Tehran's
nuclear ambitions.
"High prices have given all producing countries a lot more leverage,"
Elguindi said.
From a pure energy-supply perspective, Bolivia's decision Monday to
threaten seizing natural-gas fields from companies that refuse to
renegotiate production contracts will have little impact on the world
stage. But its symbolic significance cannot be understated, analysts
said.
Coming on the heels of petroleum-sector power plays by political leaders
in Russia and Venezuela, the grip-tightening in Bolivia underscores the
rising influence of national oil companies and the increasing difficulty
private companies face as the world's energy hunting grounds become less
hospitable.
Elguindi said major oil companies, such as Exxon Mobil Corp. and Royal
Dutch Shell PLC, have already begun shifting their businesses in
response to the changing landscape. He said multibillion-dollar
investments in Canada's tar sands and Qatar's natural gas reserves are
as much a reflection of the industry's interest in these projects as
they are evidence of companies "investing in things they have access
to."
"If you gave oil companies a choice between the tar sands in Canada or
oil in Saudi Arabia, which do you think they'd choose?" Elguindi said.
Some analysts say energy-rich nations the world over clearly have the
upper hand now -- in contrast with the late 1990s, when oil traded at
about $11 a barrel -- and that it will be up to individual companies to
decide if they can live with less control over their foreign operations
while getting less revenue per barrel.
For example, Exxon Mobil chose to sell its stake in a Venezuelan oil
field rather than accept less desirable financial terms. Many companies,
including Chevron Corp., Royal Dutch Shell and BP, agreed to convert
some of their Venezuelan oil-field contracts into state-controlled joint
ventures, betting that the ventures would still be profitable even with
a larger share of revenue going to the state.
Some analysts believe this approach will only embolden more countries to
follow Venezuela's lead, arguing that the world's largest private oil
companies -- with diplomatic support from Western governments -- should
resist being strong-armed out of existing contracts.
"Either you hang together, or you surely will hang one by one," said
Larry Goldstein, president of the Petroleum Industry Research
Foundation, a New York-based industry-financed think tank.
"I'm not sure Bolivia is the end of this game," said Goldstein.
Ecuador is arguing with Washington over a new oil royalties law. Last
week, the World Bank tentatively resolved a financial dispute with Chad,
which had threatened to shut off an oil pipeline.
The rebels threatening Nigeria's oil infrastructure have gained clout
because of high oil prices, and analysts said they would not be
surprised to see Angola try to renegotiate some of its contracts with
foreign oil companies.
"When you start polling the world for where major oil companies can do
business, you have West Africa, Russia, the Middle East and Latin
America. What they all share is that they're becoming more and more
difficult operating environments," said A.G. Edwards oil analyst Bruce
Lanni.
The European Commission said Tuesday it would study the impact of
Bolivia's action on foreign investors. Besides Brazil's Petroleo
Brasileiro SA, or Petrobras, most of the biggest natural gas players in
Bolivia are European, including Britain's BG Group PLC and BP PLC;
Spanish-Argentine Repsol YPF SA and France's Total SA.
For its part, the Bush administration said it was worried about U.S.
corporate interests being trampled upon abroad, though it stopped short
of any direct criticism of the Bolivian government.
"When the issue of privatization does come up, or renegotiating
contracts, certainly our concern is that any government meet or fulfill
its contractual obligations," State Department spokesman Sean McCormack
said. But McCormack would not say whether any contracts had been
violated because "we don't have a complete picture of the situation."
What is known is that Bolivian President Evo Morales ordered troops
Monday to surround 56 natural gas installations throughout the Andean
nation, threatening to evict foreign companies that did not give control
over production to Bolivia's cash-strapped state-owned oil company,
Yacimientos Petroliferos Fiscales Bolivianos, or YPFB, within six
months.
Morales was elected late last year on a populist platform, promising to
return to the country natural resources that had been "looted" by
foreign companies. Bolivia has South America's second-largest natural
gas reserves after Venezuela, and is a critical supplier to Brazil and
Argentina.
Daniel Yergin, chairman of Cambridge Energy Research Associates, said
Morales' action might be expedient politically, but warned that it could
backfire down the road.
"It will hardly promote the investment Bolivia needs to monetize its gas
reserves," Yergin said. "Whatever the short-term gains, there will be
long-term costs."
Source: Associated Press
|