Bolivian Nationalisation Hits Energy Firms
Bolivia's decision to nationalise its gas fields weighed on shares in companies active in the country on Tuesday, but analysts said the long-term impact on foreign firms would be small.
President Evo Morales said on Monday he had ordered the military to occupy Bolivia's natural gas fields and threatened to expel foreign firms that do not recognise state control.
Spain's Repsol YPF, the most exposed of the Western oil majors to Bolivia, opened down 3 percent, while BG Group, which has large reserves in Bolivia, also opened lower before recovering.
Analysts said they expected Brazil's Petrobras to open weaker.
The market reaction on Tuesday was muted, because Bolivia accounts for only a small portion of the affected oil firms' asset bases and because, expecting such a move, investors had already discounted the value of Bolivian barrels.
The exact details of how nationalisation will work in practice is unclear. It appears that foreign oil firms will be relegated to simply operating the fields, with all oil and gas production going to the state energy company.
Investors are concerned that the arrangements will leave operations in the country economically unviable.
"These conditions make gas operations practically impossible in Bolivia," Petrobras President Jose Sergio Gabrielli told Brazil's Globo Television Network.
LIMITED EXPOSURE
Tax hikes last year had already significantly eroded the profitability of Bolivian production, and uncertainty over the future of the industry has curtailed investment, raising concerns about Bolivia's ability to sustain production levels.
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